MercoPress. South Atlantic News Agency

Latam markets plunge on Paulson's U-turn focus change

Latinamerica's main stock markets ended sharply weaker on Wednesday following on Wall Street and US Treasury Secretary Henry Paulson's announcement that it would re focus the 700 billion US dollars bailout fund.

Brazil's Bovespa index closed at 34,373.99, down nearly 7.8% from Tuesday's close ending a three-session run of gains. Shares of major miner Vale closed nearly 6.7% off as prices of several minerals touched new lows on expectations of weaker demand for industrial metals. The Brazilian currency Real lost nearly 2.9% to 2.289 per dollar, battered by speculation that a global slowdown will cut investment flows to emerging markets. The Real weakened even after the central bank offered dollars on the spot currency market, the first such sale in almost a week, and sold about 495 USD million in currency swaps. The other big market Mexico saw the benchmark IPC stock index plunge 5% on mounting worries that the deepening economic slowdown in the United States could drag the country into recession. Mexico sends around 80% of its exports to the US. The Mexican peso lost 0.75% and closed at 13.25 to the US dollar. Argentine stocks also tumbled for a fourth straight session on Wednesday, sliding on investor concerns the global economy is heading into a recession, while the peso and bonds also fell. The benchmark Merval index plunged 5.49% to 1,008.26 points. On the foreign exchange market, the Argentine peso closed lower, its slide partially offset by intervention by the central bank. The peso currency weakened 0.15% to 3.3025/3.305 per dollar in formal inter-bank trade but 1.5% to 3.37/3.40 in money exchange houses. Chilean stock indexes also experienced a downfall on Wednesday, while the Peso gained ground against the US dollar after the central bank auctioned 332 million USD in loans to banks. Chile's blue-chip IPSA index .IPSA slid 3.53% to close at 2,476.46 while the all-market IGPA index .IGPA fell 2.75% to 11,790.69, preliminary closing figures showed. Furthermore prices for copper, Chile's leading export and a pillar of the local economy, eased to a three-year low on Wednesday as inventories rose and investors fretted about sluggish demand. Latam markets were impacted by US stock indexes which ended down 5% as major companies cut earnings outlooks and the US Treasury backed off plans to buy troubled mortgage assets. The US top electronics retailer, Best Buy warned the business climate was the worst in 40 years. On Monday, Circuit City, the second-largest US consumer electronics retailer, filed for bankruptcy. Analysts agreed that comments from US Treasury Secretary Paulson spurred investors to dump emerging market assets and flee to safer investments like US Treasury bills.