Latin America hot money flows cool as growth ebbs, Trump threatens

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BRASILIA (Reuters) – The nasty whiff of recession is hanging over Latin America and investors are taking cover as U.S. President Donald Trump ratchets up political and trade tensions. FILE PHOTO: A woman looks at an electronic board showing the graph of the recent fluctuations of market indices on the floor of Brazil’s B3 Stock Exchange in Sao Paulo, Brazil, April 3, 2019. REUTERS/Amanda Perobelli The flow of funds into the region’s equity and bond markets has evaporated in recent weeks, indicators show, and a gloomy domestic – and suddenly darker international – economic backdrop threatens to trigger full-on outflows. Trump dropped a bombshell on the world economy and markets on Thursday, vowing to slap tariffs on imports from Mexico of up to 25% unless the flow of immigrants into the United States from its southern neighbor stops. That could be the trigger that switches a slowdown in demand for Latin American financial assets into a stampede for the exits, according to some analysts. All three of the region’s largest economies contracted in the first quarter of the year. “Just when you thought it couldn’t get any worse,” Deutsche Bank’s global head of FX research George Saravelos said. “The global economy is being faced with a huge uncertainty shock across multiple fronts … This is a large additional shock.” Deutsche Bank says Mexican and Brazilian bonds are particularly vulnerable to overseas investors cutting and running. Some 61% of Mexico’s local bond market is held by foreigners, the highest of […]

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Latin America hot money flows cool as growth ebbs, Trump threatens

Latin America hot money flows cool as growth ebbs, Trump threatens
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BRASILIA (Reuters) – The nasty whiff of recession is hanging over Latin America and investors are taking cover as U.S. President Donald Trump ratchets up political and trade tensions. FILE PHOTO: A woman looks at an electronic board showing the graph of the recent fluctuations of market indices on the floor of Brazil’s B3 Stock Exchange in Sao Paulo, Brazil, April 3, 2019. REUTERS/Amanda Perobelli The flow of funds into the region’s equity and bond markets has evaporated in recent weeks, indicators show, and a gloomy domestic – and suddenly darker international – economic backdrop threatens to trigger full-on outflows. Trump dropped a bombshell on the world economy and markets on Thursday, vowing to slap tariffs on imports from Mexico of up to 25% unless the flow of immigrants into the United States from its southern neighbor stops. That could be the trigger that switches a slowdown in demand for Latin American financial assets into a stampede for the exits, according to some analysts. All three of the region’s largest economies contracted in the first quarter of the year. “Just when you thought it couldn’t get any worse,” Deutsche Bank’s global head of FX research George Saravelos said. “The global economy is being faced with a huge uncertainty shock across multiple fronts … This is a large additional shock.” Deutsche Bank says Mexican and Brazilian bonds are particularly vulnerable to overseas investors cutting and running. Some 61% of Mexico’s local bond market is held by foreigners, the highest of […]

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