Latin American stocks fell to their lowest point in more than two months on Friday, capping a weak of losses that left the region's main indexes just above key support levels. Solid Chinese and US economic data on Friday failed to offset fears about fiscal woes in the United States and Europe. The MSCI Latin American stock index fell 0.75 percent as the gauge closed out its worst week in six months with a loss of about 2.7 percent.
Mexico's IPC stock index closed below its 100-day moving average. After outperforming other emerging markets and hitting record highs in early October, Mexican stocks could face a further slump, traders and analysts said. "The drop in Mexico is going to be steeper than the other markets," said Gerardo Roman, head of trading at brokerage Actinver, who said Mexico's IPC could catch up to other markets that are already trading below their 200-day moving averages.
Shares fell this week as investors looked past US President Barack Obama's re-election toward the tough talks needed in a divided Congress to avoid a "fiscal cliff" of spending cuts and tax rises due in January. Friday's losses came despite data on Friday showing China's economy gained traction in October, while the Thomson Reuters/University of Michigan survey showed US consumer sentiment rose to its highest level in more than five years.
China is Brazil's No 1 trading partner and top purchaser of Latin American commodities, while Mexico sends most of its exports to its northern neighbour. "The market is worried ... unsure about the negotiating conditions that Obama is going to face," said Paulo Veiga, a director at Mercatto Gestão de Recursos in Rio de Janeiro. "That is overshadowing everything else right now."
Brazil's benchmark Bovespa stock index fell 0.29 percent to 57,357.71, crossing below its 100-day simple moving average, a level that has buoyed the index during the last two months of rocky trading. Daniel Marques, a chart analyst at brokerage Agora, warned that a break lower below support levels around 56,200 points could portend a fall back to the year's lows. However, cheap prices could tempt bargain hunters into the market.
"There is a good chance for a rebound," he wrote in a note. Homebuilder PDG Realty shed 2.92 percent on Friday as Bank of Brazil lost 2.33 percent. Hypermarcas SA, the largest Brazilian producer of disposable consumer goods, fell 2.11 percent, while retailer Cia Hering SA slipped 4.68 percent on concerns that tax changes could hit their earnings.
Brazil's Braskem SA, Latin America's largest petrochemical company, lost 4.75 percent after Chief Executive Carlos Fadigas said on a Friday conference call that he expects demand for plastic resins to decline about 8 percent in the fourth quarter from the prior three months. Brazil's Bovespa has fallen nearly 8 percent since mid-September, with foreign investors taking 1.23 billion reais ($600 million) out of the market in October.
"Foreign investors are taking their money and putting it in other emerging markets where they have more stable ground rules," said Carlos Manuel Pereira de Sousa, a strategist with Lopes Filho e Associados in Rio de Janeiro. Sousa pointed to investor discomfort over unpredictable government intervention in the private sector as a key barrier to attracting funds from abroad.
Mexico's IPC index dropped 0.38 percent to 40,677.07. Billionaire Carlos Slim's America Movil slipped 0.69 percent and miner Grupo Mexico lost 1.33 percent Fanuel Fuentes, a technical analyst at brokerage Monex, warned that a break of the 40,200 and 40,000 levels could signal steeper losses to follow. Chile's IPSA index slipped for a third straight day, down 0.29 percent as retailer Falabella fell 0.72 percent and regional energy group Enersis dropped 2.75 percent.
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