Latin American stocks fell on Friday in line with global markets slid as Standard & Poor's downgraded eurozone sovereign credit ratings but analysts said the slump could be temporary. The MSCI Latin American stock index lost 1.22 percent, falling back from a two-month high hit in the previous session after four days of gains. The gauge was still on track to post a rise of around 2.7 percent this week.
Latin American stocks have seen a sharp rally since October as fears eased that Europe's debt crisis could spark a global financial crisis. Credit ratings agency Standard & Poor's downgraded the credit ratings of nine euro zone countries but not those of EU paymaster Germany.
Market players had been expecting such news after a warning from S&P last year, but the move still weighed on global equities markets on Friday. "I think the surprise next week is going to be how little effect these downgrades will have," said Patricia Berry, an analyst at Mexico City brokerage Intercam. "All eyes are going to be on company earnings in the United States."
A slew of corporate earnings are due out in coming weeks and analysts will be looking for guidance from major companies on how the global economy will fare this year. Market watchers said Friday's drop on the news was only a minor pullback given the rally of more than 18 percent seen in Latin American stocks since early October. "The market is not buying the idea that it should tumble on this news (of European downgrades)," said Fanuel Fuentes, an analyst at brokerage Monex in Mexico City.
"Today's drop does not mean anything in terms of the uptrend we have seen ... In the short term at least, the market is betting that this situation (in Europe) may be hitting bottom," Fuentes said. Stocks in Brazil fell for a second day as investors took profits from gains to a nearly six-month high this week, dumping real estate and mining shares.
Brazil's benchmark Bovespa stock index declined 1.29 percent on the day, but the index is still heading for an overall gain this week of about 0.9 percent. The index is up more than 16 percent since early October. Preferred shares of the world's biggest iron ore miner Vale fell 1.04 percent. Vale said on Thursday the heavy rains that prompted it to cut production this week will have "minimal" effects on world iron prices and the company's revenue.
Homebuilder PDG Realty dropped 3.87 percent while shares of steelmaking group CSN, whose mining unit is Brazil's No 2 exporter of iron ore, fell 0.79 percent. The company is considering halting iron ore shipments because of the heavy rains. Mexico's IPC stock index fell 2.107 percent to 36,548 points. Fuentes said a break of the 36,500 level could spur a deeper sell-off. Mexico's IPC was heading for a weekly loss of about 0.69 percent.
Shares of telecommunications giant America Movil, controlled by tycoon Carlos Slim, shed 2.13 percent. Slim and US television host Larry King are in "advanced talks" that could lead to a media venture between the two, a close aide to the Mexican businessman told Reuters. Chile's IPSA index dipped 0.20 percent, supported by the unexpected move by the country's central bank to lower borrowing costs in order to boost the economy. The IPSA ended the week little changed, with retailer Cencosud down 1.56 percent on Friday.
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