Key facts
- A major earthquake in Colombia killed at least 20 people and caused widespread damage.
- Colombian stocks (COLCAP index) fell 0.51% following the earthquake.
- Latin American assets were generally muted due to Middle East conflict worries.
- Mexican stocks were the biggest laggards in the region, falling 0.91%.
- The MSCI index for Latin American stocks declined 0.26%.
Colombian equities experienced a decline following a significant earthquake that resulted in at least 20 fatalities and substantial damage across the country. The COLCAP stock index fell by 0.51%, and several dollar-denominated bonds also saw lower trading prices. However, the Colombian peso strengthened by 1.09% against a rising dollar, becoming one of the top-performing regional currencies.
The earthquake's impact comes at a critical juncture for Colombia, as it transitions to a new administration under right-wing President Abelardo De La Espriella. De La Espriella, who was sworn in recently, has pledged to combat drug trafficking and implement austerity measures aimed at restoring economic confidence. The U.S. State Department announced that President Donald Trump's administration intends to provide $1 billion in security assistance to De La Espriella's government. Policy experts Jason Marczak and Bruce Mac Master of the Atlantic Council noted this move signifies a significant shift from the strained relationship with former President Gustavo Petro, offering an opportunity for both administrations to advance their shared agendas and potentially expand U.S. business opportunities and boost Colombian production.
Elsewhere in Latin America, market sentiment remained subdued. Mexican stocks were the region's weakest performers, dropping 0.91%, with the peso declining 0.13%. This downturn occurred as the European Union imposed tariffs on terephthalic acid, a PET plastic raw material, originating from South Korea and Mexico, to support European producers. Brazil's Bovespa index decreased by 0.37%, and its currency, the real, fell 0.32%. The broader MSCI index for Latin American stocks slipped 0.26%, while its currency gauge remained flat.
Concerns over the prolonged conflict in the Middle East contributed to the muted regional performance. Tehran's reiteration that it would not reopen the Strait of Hormuz until Washington met certain demands could keep oil prices elevated and inflation risks prominent. This regional caution contrasted with emerging market peers in Asia, where equities rose despite higher oil prices, buoyed by a weak U.S. jobs report that reduced the likelihood of further Federal Reserve interest rate hikes and boosted overall risk appetite.
Chile and Peru were the only Latin American markets to register gains, with their respective stock indexes rising 0.10% and 0.27%.