Mexican peso trims early losses Brazil's real surges 1% Mexican...

• Mexican peso trims early losses
• Brazil's real surges 1%
• Mexican stocks near record highs

(Adds details, updates prices)

Mexico's peso led losses across Latin American currencies on Wednesday as second-quarter GDP data missed expectations and raised fears of slowing growth. Brazil's real rebounded further from steep losses in recent sessions.

The peso MXN= fell 0.3% as second-quarter economic growth came in at 1.5%, slightly below expectations of 1.7%. The Mexican economy also shrank in June from May.

The reading, coupled with a spike in coronavirus infections has made the peso appear less attractive than some its high-yielding emerging market peers. A drop in Mexican inflation in the first half of August also lowered the chance of an interest rate hike by the central bank.

"Even prior to the current crisis, the country’s economy had been under pressure, contracting in six of the eight quarters leading up to the pandemic," said Matthew Ryan, senior market analyst at Ebury.

"The recovery has, however, not been quite as rapid as many of Mexico’s peers. We think this is partly a consequence of the government’s unwillingness to increase fiscal spending."

Mexican stocks .MXX rose 0.5%, extending gains after hitting a record high on Tuesday. Industrials, and sectors most likely to benefit from an economic recovery were the top boosts to the benchmark index.

But analysts questioned whether the gains would last, especially due to laggard vaccinations in the country.

"The country’s equity market will likely continue to benefit from still-abundant global liquidity and further rounds of U.S. fiscal spending," said Alejo Czerwonko, chief investment officer, Emerging Markets Americas, at UBS Global Wealth Management.

"But Mexico’s ability to repeat such a strong outperformance versus other emerging markets is in doubt, and we think a neutral stance is more appropriate now."

Brazil's real BRBY BRL= rose 1% after surging nearly 3% on Tuesday, as a rise in August inflation pointed to more hawkish moves from the central bank.

The real has rebounded from steep losses in recent sessions as investors look towards progress made by the government in improving its fiscal situation after a severe rise in spending during the pandemic.

Data also showed that Brazil posted a much larger-than-expected current account deficit in July.

Other Latam currencies retreated as concerns over rising COVID-19 cases persisted from last week. The dollar was slightly lifted by safe-haven demand.

Latin American stock indexes and currencies:

							  Latest	   Daily % change 
 MSCI Emerging Markets		 1275.92				  0.47 
  .MSCIEF								

 MSCI LatAm					2476.46				  1.09 
  .MILA00000PUS						  

 Brazil Bovespa			  120517.45				  0.26 
  .BVSP								  

 Mexico IPC				   52264.06				  0.54 
  .MXX								   

 Chile IPSA					4409.04				  0.91 
  .SPIPSA								

 Argentina MerVal			 71920.39				 0.794 
  .MERV								  

 Colombia COLCAP			   1325.93				 -0.18 
  .COLCAP								

	   Currencies			 Latest	   Daily % change 
 Brazil real		BRBY		5.2072				  1.03 
										 
 Mexico peso				   20.2534				 -0.26 
  MXN=D2								 

 Chile peso	   CLP=			 783				 -0.14 
										 
 Colombia peso  COP=			3863.5				  0.04 
 Peru sol		 PEN=PE		 4.082				  0.01 
										 
 Argentina peso				97.4800				 -0.02 
 (interbank)  ARS=RASL