Latin American stocks dropped on Friday after the United States posted its weakest monthly job growth in a year and data showed Brazil's economy grew slower than expected in the first quarter, dampening investor optimism over a global economic recovery.
The MSCI Latin American stock index fell for the second session in three, slipping 1.32 percent to 3,348.96. The index is on track to close the session with a 1.25 percent weekly loss. Shares fell after the US Labour Department said May job growth in the world's largest economy was the lowest in a year, falling far below market expectations and suggesting that economic recovery there was faltering.
Further souring growth expectations, purchasing managers index data from the euro zone and China on Friday showed manufacturing output shrinking in both regions, which are key trading partners for Brazil and large purchasers of Latin American commodities such as iron ore, soybeans, copper and petroleum.
"We are seeing a strong aversion to risk, with bad news around the world and a fall in economic activity in almost all countries, showing that the European crisis is beginning to affect the global economy," said Newton Rosa, chief economist with SulAmérica Investimentos in Sao Paulo.
The slowdown was reflected by data on Friday showing Brazil's economy grew a worse-than-expected 0.2 percent in the first quarter. Investors responded by selling off shares of commodities companies, which are closely tied to global growth, as well as homebuilders and consumer product manufacturers, whose fortunes are more closely linked to domestic demand.
Brazil's benchmark Bovespa stock index fell for the third session in four, losing 1.23 percent to 53,822.47. The index is set to close the session with a 1.18 percent weekly loss, its sixth in a row. OGX, the oil company controlled by Brazilian billionaire Eike Batista, fell 2.43 percent, weighing most heavily on the index, while PDG Realty, Brazil's No 1 homebuilder, dropped 4.17 percent.
The Bovespa saw a net 2.73 billion reais ($1.34 billion) outflow of foreign funds in May through the 29th, as global investors sold off riskier Brazilian shares on mounting fears of a global crisis and a slowdown in domestic economic growth. "At one point, Brazil grew much faster than the rest of the world - it was the goose that laid the golden egg," said Flavio Serrano, economist with Banco Espirito Santo in Sao Paulo. "But there has been a slowdown in growth, the consumption expansion model hasn't been enough to leave the economy as strong as investors would like, so they are now looking for other investment opportunities in other parts of the world."
Mexico's IPC index fell its most in two weeks, losing 0.9 percent to 37,523.16. Still, the index is set to close the week with a 0.2 percent weekly gain, its second in a row. Telecommunications firm America Movil, controlled by billionaire Carlos Slim, lost 1.66 percent, while cement manufacturer Cemex fell 3.99 percent. Chile's IPSA index snapped a six-day rally and posted its biggest drop in over a week, losing 0.84 percent to 4,282.37. The index is on track to close the week with a 0.6 percent gain, its best weekly performance since mid-April. Retailer Cencosud lost 1.36 percent, weighing most heavily on the index, while retailer Falabella dropped 0.72 percent.
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