Latin American stocks sank on Friday after US data showed job growth stalled as investors said markets could remain volatile until investors get more clarity on potential US stimulus plans. The MSCI Latin American stock index tumbled 3.24 percent, falling back from a one-month high.
Investors are awaiting a speech next Thursday by US President Barack Obama, who is set to lay out a plan to spur job growth in the United States after a payrolls report surprisingly showed no new jobs were created in August. "The economic situation is still hanging by a thread, it's very fragile," said Carlos Alonso, a trader at brokerage firm Interacciones in Mexico City. "There is still a lot of volatility, that's a fact ... you are going to see lateral moves until the market sees what happens with Barack Obama."
Market players are also keenly awaiting a meeting of the Federal Reserve later this month where policymakers are expected to mull options for more economic stimulus. Previous programs from the Fed have boosted global stocks. In Brazil, stocks slumped, erasing sharp gains from the previous session after the country's central bank surprised investors by cutting its key interest rate to 12 percent.
Brazil's benchmark Bovespa index slumped 2.73 percent, with state-controlled oil company Petrobras sinking 3.18 percent and Itau Unibanco dipping 2.63 percent. "The gains may have been overdone," said Rafael Espinosa chief strategist at Capital Market in Sao Paulo.
Brazil's rising interest rates have hurt stocks this year as investors preferred high-yielding bonds. Further unnerving investors, questions emerged on Friday about whether Greece can meet its bailout conditions, setting off renewed worries of a deepening European debt crisis. But the dreary global outlook could lighten a bit if the US jump starts its economy "If the US goes ahead with QE3 easing and inflation stays under control we will have a very good situation here," Espinosa said, referring to a Federal Reserve bond-buying program that would inject cash into the economy. Mexico's IPC stock index dropped 1.41 percent as shares of America Movil fell 2.15 percent. Chile's IPSA index weakened 1.33 percent with Banco Santander Chile falling 3.51 percent.