Latin American stocks posted their biggest decline in over a week on Friday after disappointing results by some leading US companies spooked investors about the likelihood of an economic turnaround in the world's top economy. The MSCI Latin American stock index dropped 0.89 percent to 3,725.84, but the gauge still was on track for an around 0.8 percent gain in the week.
Mining giant Vale pushed Brazil's benchmark Bovespa index to its biggest daily loss of the month, while retailer Cencosud dragged on Chile's IPSA index. Local shares tracked external markets lower in the wake of disappointing results from McDonald's Corp, Microsoft and Google as investors re-evaluated the impact of a sluggish global economy on the outlook for Latin America.
"The results caused disappointment in some companies and investors are becoming more cautious these days," said Silvio Campos, an economist at the Tendencias consultancy in Sao Paulo. Brazil's benchmark Bovespa stock index fell for the second straight day, losing 1.36 percent to 58,922.04 points, its biggest fall since the end of September.
After falling off a more than four-month high in early September, the Bovespa has been oscillating within a range of roughly 58,000 to 60,000. "The picture is still unstable and there are many uncertainties that limit a recovery," Campos said. "The Bovespa should continue to be volatile, but aside from that, there is no clear trend in the market."
Heavily weighted mining firm Vale slipped 1.72 percent, contributing the most to the index's losses, while state-controlled oil company Petrobras dropped 1.11 percent. Homebuilder Gafisa was the biggest percentage loser on the Bovespa, with a 5.92 percent decline. Clothing retailer Cia Hering plunged more than 5 percent after it reported a 14.2 percent drop in third-quarter income compared with the same period last year.
Steelmakers also fell, with shares of Gerdau slipping 4.36 percent and those of rival CSN down 3.39 percent. Brazil's domestic flat and long steel sales fell a combined 6 percent in September on a sequential basis, indicating that demand for rods, plates and slabs remains "weak" in Latin America's largest economy, analysts at BTG Pactual Group said on Friday.
Mexico's IPC index fell 0.48 percent to 42,386.83 off a record high, but the index still accumulated a 1.7 percent gain for the week. Investors funnelled $130 million into Mexico-dedicated stock funds, according to data collected by EPFR Global, their biggest inflow in more than a year, suggesting a spike in confidence in the Mexican market.
Mexico has been supported by signs of faster growth in its top trading partner, the United States, after the jobless rate there fell and retail sales picked up boding well for continued demand for Mexican exports. "Mexico as ever is very correlated to the US so it has been getting a lot of second looks given the US is the only major economy kicking out cheery macroeconomic numbers," said Cameron Brandt, head of research at EPFR.
Bank Banorte fell 2.72 percent, contributing the most to the index's losses, while mining company Industrias Penoles lost 1.01 percent as it fell for a second day off a record. Cement manufacturer Cemex dropped 2.03 percent. The company said on Friday that it plans to list about 24 percent of its Cemex Latam Holdings unit on the Colombian stock market in an effort to raise cash to help ease its bulky debts.Chile's IPSA index posted its biggest loss since late August, falling 1.31 percent to 4,265.38, as shares of retailer Cencosud plunged.
Cencosud dropped around 6 percent after the firm said on Friday that it aims to propose a capital increase of around $1.5 billion to shareholders within the next 120 days and issue around $1 billion in bonds on the US market within the next 90 days.