* Sovereign dollar bonds track Treasuries higher
Latin American stocks and currencies posted losses on Friday after U.S. consumer sentiment weakened unexpectedly in August, raising questions about the strength of the economic recovery and increasing global aversion to risk.
Investors also took an opportunity to pocket some profits from a recent market rally that had lifted the MSCI stock index for Latin America .MILA00000PUS this week to its highest level in nearly 11 months.
The benchmark indicator fell 0.96 percent on Friday, finishing the week with losses of nearly 1 percent. However, it still boasts gains of more than 70 percent since the beginning of March.
The market turned negative on profit-taking, tracking what's happening in the U.S., said Rodrigo Andaur, an analyst with FIT Research in Santiago. I think there is also some concern about the value stocks have reached.
Leading losses was the Argentine MerVal stock index .MERV, which slid 1.89 percent. Mexico's IPC index .MXX followed suit with a decline of 1.07 percent, despite news that HSBC had raised its rating on Mexican equities to overweight from neutral.
Brazil's benchmark Bovespa index .BVSP lost 0.72 percent, while Peru's IGRA .IGRA slipped 0.71 percent as shares of miners and oil companies fell along with lower commodity prices.
Markets had been rallying on signs that the world's largest economy is emerging from recession, but Friday's data on U.S. consumer sentiment poured cold water on investors' recovery hopes.
The Reuters/University of Michigan's index of consumer confidence for August fell to 63.2 from 66.0 in July, well below market expectations for a reading of 68.5.
The number showed a growing number of Americans were worried about their finances, even though they expected the broader economy to improve.
The Brazilian real BRBY led losses among Latin American currencies, weakening 1.29 percent to 1.856 per U.S. dollar. Currency traders said there were some dollar outflows from foreign investors willing to take profits from the real's recent rally.
The Chilean peso CLP=CL weakened 0.6 percent to 552.30 per dollar, its weakest in nearly two months. Despite the losses, it has still gained 16.2 percent against the dollar so far this year.
Bucking the market sell-off, prices of dollar-denominated bonds issued by Latin American countries traded flat to higher.
U.S. Treasury prices also rose, and yield spreads between the two asset classes widened only slightly as a result -- 1 basis point to 371 basis points, according to the JPMorgan EMBI+ index 11EMJ.