LatAm Shares plunge as weak U.S. housing data

Latin American stocks fell on Tuesday, by an unexpected drop in sales of U.S. homes that had been added to concerns about a possible loss of momentum in the global economic recovery. Investors seized upon as safe assets such as Treasuries United States, provoking a fall of 0.81 percent of the MSCI Latin American stock index to 3928.35 points. Brazil was the best performing market in the region and its benchmark stock index closed slightly lower, supported by optimistic outlook for the steel mills.

Juan Jose Resendiz, head of research at Arka in Mexico City, said that risk aversion is growing and that when the Treasury 10-year 3.20 per cent exceeded the stock market fell. Sales of second hand houses in the U.S. fell unexpectedly in May, which was a bad sign for a sustained recovery of the world's largest economy.
The United States is Mexico's main trading partner and a key economic influence in Latin America. Brazil's Bovespa index closed down 0.03 percent, while Mexico's IPC index sank 1.25 percent. The Chilean stock index, the IPSA, yielded 0.95 percent, after reaching a record high on Monday.

Analysts are concerned by signs that the U.S. recovery may be moderating. That could add to concerns about the debt crisis of Europe, and the slow movements of China to adjust its money supply growth and cool. After being beaten in April and May, Latin American shares have risen steadily since 20 May, and the MSCI Latin American index on Monday reached a maximum of seven weeks.

Before reversing the gains, the Bovespa reached its highest intraday level since May 10, leaning on the rise in steel shares. It is expected that Brazilian steel mills benefit of a new round of price hikes of some steel products, according to analysts at Banco Bradesco.
The robust growth of Latin America's biggest economy is fueling demand for building materials. CSN's shares rose 0.85 percent, while shares of Usiminas gained 0.89 percent. Shares of state-owned Brazilian energy company Petrobras fell 0.99 percent. In Mexico, America Movil's shares lost more than 1 percent, and the Cemex cement fell 2.28 percent after a surprise drop in home sales in the U.S.