Latin American assets fell on Friday to their lowest levels so far this year, as another escalation in the US-China trade war and worries over Mexico's growth kept investors on the edge. Beijing imposed additional tariffs on thousands of US products effective Sept. 1, infuriating US President Donald Trump who hit back by asking US companies to start looking for alternatives to their China operations.
The unexpected move in the long drawn-out dispute between the world's two largest economies renewed fears of a global slowdown and prompted a global sell-off in riskier assets. "Even though China's tariffs are smaller than what the US has imposed, the sudden surprise element of it all should cause a risk-off to asset markets globally," Iris Pang, economist, Greater China, ING, said in a note.
Latin American currencies, which fell more than 1%, were on course to record a fifth consecutive week of losses with Mexico's peso hitting eight-month lows.
Mexican gross domestic product was unchanged in the second quarter from the preceding three months, slightly weaker than a preliminary estimate, showing the economy was even closer to entering a recession in the first half of 2019 than previously anticipated.
Other regional currencies like the Brazil's real and Colombia's peso slid over 1%, despite a weaker dollar. MSCI's index of Latin American stocks shed nearly 3% with heavyweight Bovespa index falling more than 2%. Mexican stocks made the smallest losses. Argentina's peso, which shed nearly 18% last week, extended losses to record a sixth straight week of losses.
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