(Reuters)-The rates that accompany Latin American actions and currencies fell on Friday, putting them on the way to the biggest drop in one day in five years as investors were concerned about the climbing of trade war could lead to a recession.
China has announced additional 34% tariffs on US products days after US President Donald Trump launched his commercial attack on the world, with Beijing imports being hit by the highest tariffs.
The MSCI Index that accompanies the actions of the region fell 6.7%, on the way to its largest daily drop since market liquidation during the Covid pandemic. The falls of the day also left the index on the path of weekly losses of more than 4%.
Most economies in the region are a major commodity exporter and the drop in gross oil prices and basic metals weighed on their currencies and the actions of basic resource companies, as investors preceded the growing probability of global economic slowdown.
“China is the main market for Latin American commodities … So if China and the US enter a trade war and both economies lose economic performance, we will have the two main markets in the war and this will affect global demand,” said Alfredo Coutino, director for Latin America at Moody’s Analytics.
This Friday, the main energy companies in the region had losses, with Petrobras (PETR4) falling 4.8%, Colombian ecopetrol retreating 6.5%and Argentina YPF YPF plummeting 12.2%.
Continues after advertising
Vale (Vale3) fell 4.4%, which also weighed on Ibovespa.
The main rates of Mexico, Colombia, Chile and Peru fell about 2% to 3% each, while Argentina’s Merval fell by 10.3%.
Regarding currencies, the MSCI indicator weakens 3.3% over the dollar after reaching a maximum of 10 months in the previous session. The index has also been on its way to its biggest daily drop since March 2020.
Continues after advertising
Mexican weight devalued 2.9%, being negotiated at 20.47, falling after the currency reached its strongest level since November in the previous session.
Chile and Peru copper exports coins lost 3.1% and 0.7%, respectively, since metal prices fell to the lowest level in eight months due to concerns that economic slowdown could decrease demand for industrial metal.
The real devalued about 2.8%. China’s retaliation should accelerate Beijing’s movement towards alternative agricultural suppliers, including Brazil, similarly to Trump’s trade war with China during its first term.
Continues after advertising
The weight of Colombia, an exporter of oil, fell 3%. Also exacerbating concerns about domestic tax issues, Astrid Martinez, chairman of the Autonomous Fiscal Rules Committee, said Colombia needs additional 2025 budget adjustment to comply with tax rules.