Latam stocks rise as US growth worries ease; currencies gain

Updated at 1927 GMT

By Lisa Pauline Mattackal and Ankika Biswas

Aug 15 (Reuters) –Stocks and currencies in Latin America rose on Thursday after stronger than expected U.S. retail sales data calmed fears about a slowdown in the world’s largest economy, while gains in commodity prices lifted regional currencies.

MSCI’s index of Latin American stocks .MSCIEF rose 0.6% and was on track for an eighth session of gains.

Local bourses rose, with Argentina’s Merval .MERV, Brazil’s Bovespa .BVSP, Colombia’s Colcap .COLCAP and Mexican stocks .MXX up between 0.6% and 2.3%.

U.S. retail sales data jumped more than expected in July and jobless claims slipped, pointing to a still-resilient economy. That soothed worries about slowing demand which had unnerved markets over the past few weeks, while making the case for a hefty 50-basis-point rate cut by the Federal Reserve in September.

However, the data, following Tuesday’s consumer prices report dialed back bets of a 50-bps cut to a 25-bps one. Traders now see a 74.5% chances of a 25-bps cut in September.

“The market fallout from the weak early August U.S. data was disproportionate and in large part reflected the rapid unwind of crowded positions in some markets,” said Jonas Goltermann, deputy chief markets economist, Capital Economics.

“While the risk of a recession in the U.S. has increased a little, there are few signs of a more substantial crisis brewing… We are sticking to our optimistic forecasts for equity markets and ‘risky’ assets more broadly.”

Most Latin American stock indices have all but recovered losses from a steep selloff earlier in the month.

Latam currencies also gained, as a sharp rise in prices of oil and copper boosted producers.

Mexico’s peso MXN= rose 0.8% against the dollar, while Chile’s peso CLP= and the Colombian peso COP= edged up 0.1%each.

Data showed Colombia’s economy grew 2.1% in second quarter versus the year-ago period, below market expectations of 2.4%.

Peru’s sol PEN=PE lagged, however, dipping 0.3%. Data showed the economy expanded slightly in June year-on-year, as the Andean country staggers out from last year’s recession.

Brazil’s real BRL= also slipped 0.2%, on track for its second day of losses after an eight-day gaining streak.

Local markets in Chile were closed for a holiday.

The U.S. data also soothed concerns about a slowdown in China’s economy after weaker data earlier in the day.

China’s central bank governor said policymakers would stick to supportive monetary policy and aim to help consumers’ financing needs.

Key Latin American stock indexes and currencies at 1927 GMT:

Reporting by Lisa Mattackal and Ankika Biswas in Bengaluru; Editing by Bernadette Baum and Alistair Bell