* Brazil manufacturing activity jumps at record pace in August * LatAm equities track best day since June * Argentina defuses fears of default after debt deal * Chilean peso climbs ahead of central bank meeting (Updates prices throughout, adds comments) By Sagarika Jaisinghani and Shreyashi Sanyal Sept 1 (Reuters) - Brazil's real jumped on Tuesday after data showed manufacturing grew at record pace in August, while President Jair Bolsonaro extended a COVID-19 welfare program until the end of the year. The real was up 1.8% after data showed solid recovery in factory activity from the COVID-19 crisis, and as payments were extended for low-income Brazilians hit by the economic fallout from the pandemic. Separately, data showed Brazil's economy shrank in the second quarter by the most on record, however analysts say the contraction was less than feared. "The downturn in Brazil's economy was more modest than in other parts of Latin America," William Jackson, chief emerging markets economist at Capital Economics said. "Relatively less stringent lockdown measures as well as fiscal support meant that private consumption didn't suffer as much as in the other major economies in the region." The country's stock index jumped 2.5%, as miner Vale SA jumped 3% higher iron ore prices. An index of Latin American currencies firmed 1.8% to its highest in nearly one month, following robust manufacturing surveys from some of the world's biggest economies. The Chilean peso as data showed a smaller-than-feared decline in economic activity. All eyes are now on a central bank meeting later in the day, where it is expected to keep interest rates unchanged. "We think the bank will reiterate that it will keep a strong monetary impulse for a prolonged period and that the rate will likely remain at its technical minimum of 0.5% over the policy horizon," said Alonso Cervera, managing director of emerging markets economics research at Credit Suisse. The Colombian peso jumped 1.6% a day after the central bank trimmed interest rates, as expected. The Mexican peso firmed 0.5% against a weaker dollar. Local surveys showed factories were still hurting last month from the pandemic, with production falling and firms cutting workers, but the pace of the slide in business conditions eased for a fourth straight month. Argentina gained backing from creditors allowing it to exchange 99% of the bonds involved in a $65 billion restructuring in a deal that could set a precedent for future sovereign crises. The peso edged lower. A strong deal is a major win for Latin America's No. 3 economy, as it now looks to sealing a new program with the International Monetary Fund to replace a defunct $57 billion facility agreed in 2018. A gauge for emerging market equities jumped 3.8% and was on course for its strongest session since June. Key Latin American stock indexes and currencies at 1943 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1117.84 1.48 MSCI LatAm 2008.07 3.75 Brazil Bovespa 101860.95 2.51 Mexico IPC 37515.37 1.83 Chile IPSA 3761.99 -0.14 Argentina MerVal 46591.05 -0.522 Colombia COLCAP 1248.41 2.66 Currencies Latest Daily % change Brazil real 5.3830 1.80 Mexico peso 21.8140 0.30 Chile peso 771.2 0.69 Colombia peso 3670.46 1.89 Peru sol 3.5268 0.42 Argentina peso (interbank) 74.2400 -0.08 Argentina peso (parallel) 130 3.85 (Reporting by Sagarika Jaisinghani and Shreyashi Sanyal in Bengaluru Editing by Alistair Bell)
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