Latin American stocks fell on Friday after Fitch Ratings downgraded Italy's and Spain's credit ratings, spooking investors who fear Europe's sovereign debt could set off another global financial crisis. Stock markets in Brazil, Mexico and Chile jumped in early trading on a stronger-than-expected US monthly employment report, but the region ended in the red.
Fitch cut Italy's sovereign credit rating by one notch and Spain's by two, underscoring the vulnerability of the eurozone, already struggling to contain worries of a default by the far smaller Greek economy. Slumping prices for European bonds are hurting major banks.
Investors cut exposure to riskier assets ahead of a weekend meeting between the leaders of France and Germany on how to strengthen shaky eurozone banks. Germany is reticent to use EU funds to back banks. "A lot depends on this meeting," said Rodolfo Navarrete, head of analysis at brokerage Vector in Mexico City. "The financial situation in Europe is worsening and if they do not manage to recapitalize the banks, there could be another banking crisis."
The MSCI Latin American stock index rose 0.85 percent, but markets in major Latin American countries fell. Brazil's benchmark Bovespa stock index dropped 2 percent, nearly erasing gains made in the previous session. Shares of state oil company Petrobras lost 2.92 percent while Vale, the world's biggest iron miner, shed 2.52 percent. Mexico's IPC index lost 0.83 percent as broadcaster Televisa lost 3.82 percent and bottler FEMSA fell 1.42 percent.
The market shrugged off data showing US employers hired more workers than expected in September, which suggested the labour market in Mexico's biggest trading partner could be improving. Chile's IPSA index dipped 0.60 percent as retailer Falabella shed 2.43 percent and airline LAN dropped 3.15 percent.