January 18, 2019 / 9:56 PM / a year ago

EMERGING MARKETS-Latam shares rally on trade optimism

 (Recasts throughout, updates prices)
    By Susan Mathew
    Jan 18 (Reuters) - Latin American stocks rallied sharply on
Friday, with Brazil shares hitting yet another record high and
Argentine stocks rising more than 2 percent, as equities around
the world were cheered by the possibility of the China-U.S.
trade conflict ending.
   The latest boost in sentiment came after a report on Thursday
that U.S. Treasury Secretary Steven Mnuchin was considering
lifting some or all tariffs imposed on Chinese imports. The
Treasury denied Mnuchin had made any such recommendation.

    "Any evidence that the U.S. and China are close to a trade
agreement will result in a sustained higher movement in risky
assets," said Jasper Lawler, head of research at the London
Capital Group.
    The bruising tariff war between the world's two largest
economies hurt markets across the globe last year and has
contributed to the slowdown in global growth.
     The MSCI index of Latin American shares
renewed its eight month peak hit last session and logged its
fourth straight week of gains. 
    Brazil shares rose 0.8 percent to 96,096.75,
extending its record-hitting streak. The Bovespa has scaled new
peaks on most days this year boosted by optimism regarding the
reform agenda of the new government.
    State power company Eletrobras was
among the top gainers after it revealed cost saving plans, while
higher commodity prices bolstered material stocks.
    Stocks in Argentina rose 0.7 percent and touched
their highest level in over a year. 
    The country's economy minister Nicolas Dujovne said
Argentina outperformed its 2018 primary fiscal deficit target
set by the International Monetary Fund, keeping its $56.3
billion financing agreement with the IMF on track. 
    Among currencies, Brazil's real struggled to hold
gains against a stronger dollar and ended the week lower for the
first time in five weeks.
    The Mexican peso weakened 0.4 percent, but posted
gains for the eight straight week.
    Analysts, however, are increasingly turning bearish on the
peso as they weigh risks from the policies of the new government
- the latest being the closure of key gasoline and diesel
    "Whether this is the right strategy seems highly doubtful,"
said Commerzbank analysts regarding the pipeline closures. "The
Mexican economy is now struggling with supply bottlenecks and it
is not clear when this situation will end. In this respect, the
effects on the economy and inflation are also unclear."
    Meanwhile, Morgan Stanley analysts warn of risks associated
with markets pricing in a more dovish stance by the central bank
in the medium term stemming from the new Bank of Mexico board
    "MXN's recent out-performance is owed mainly to the fact
that Banxico has been one of the more proactive central banks in
terms of monetary tightening."
    "Any shift away from prioritizing price and financial
stability over growth could have an important effect on some
nominal variables (particularly MXN)," they said.
    Bucking the trend, the Argentine peso and the
Colombian peso rose, the latter helped by soaring oil
    Key Latin American stock indexes and currencies at 2127 GMT:
 Stock indexes               Latest      Daily
 MSCI Emerging Markets         1017.99      0.89
 MSCI LatAm                    2868.78      1.19
 Brazil Bovespa               96096.75      0.78
 Mexico IPC                   44256.50      0.74
 Chile IPSA                    5479.04      0.79
 Argentina MerVal             35100.45      2.44
 Colombia IGBC                11647.90         0
 Currencies                  Latest      Daily
 Brazil real                    3.7510      0.10
 Mexico peso                   19.0897     -0.41
 Chile peso                     669.82      0.01
 Colombia peso                    3121      0.30
 Peru sol                        3.319      0.18
 Argentina peso                37.5600      0.40
 (Reporting by Susan Mathew in Bengaluru; Additional reporting
by Paula Arend Laier in Sao Paulo; 
Editing by Sandra Maler)
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