January 8, 2018 / 11:40 PM / a year ago

EMERGING MARKETS-Brazil stocks hit record high on election optimism

 (Updates prices throughout)
    By Bruno Federowski
    SAO PAULO, Jan 8 (Reuters) - Brazilian stocks edged higher
to mark a record close on Monday, underpinned by optimism over
the nation's fiscal outlook as well as a strong flow of
international investment.
    The benchmark Bovespa stock index continued its
climb following a seven-day string of gains. 
    The rally in Brazilian stocks has been supported by investor
betting on a market-friendly winner in this year's presidential
elections, who would advance President Michel Temer's austerity
    Former President Luiz Inácio Lula da Silva, who has railed
against Temer's policies, is leading opinion polls, but he could
be barred from running if a conviction for corruption is upheld
by a higher court on Jan. 24.
    Signs that an economic recovery is picking up steam have
also supported demand for Brazilian stocks, which should see
earnings growth as Latin America's largest economy regains a
solid footing.
    "Inflows from foreign investors remain substantial and the
pipeline looks strong," analysts at the Magliano brokerage wrote
in a report.
    The Brazilian real and Mexican peso ticked downward,
roughly in line with major Latin American currencies, except for
the Chilean peso, which rose slightly.
    Analysts warned the Mexican peso may continue to weaken
ahead of talks later this month in Montreal on the future of the
North American Free Trade Agreement (NAFTA), which U.S.
President Donald Trump has threatened to scrap. 
    Mexico's benchmark index S&P/BMV IPC climbed 0.22
percent, reaching its highest level since Oct. 20.
    Bottler and retailer Fomento Economico Mexicano, or FEMSA,
 pushed gains, with shares climbing 1.42 percent. 
    Traders in emerging markets have been closely following U.S.
economic indicators and remarks by policymakers for hints over
the pace of interest rate hikes in the United States,
particularly after a mixed jobs report last week.
    Higher U.S. rates could dampen demand for emerging markets,
which offer higher yields.
    Key Latin American stock indexes and currencies at 2140 GMT:
 Stock indexes               Latest          Daily   YTD pct
                                               pct    change
 MSCI Emerging Markets          1,206.86      0.49      4.18
 MSCI LatAm                     2,981.63      0.42      5.43
 Brazil Bovespa                79,378.54      0.39      3.90
 Mexico IPC                    49,995.57      0.22      1.30
 Chile IPSA                     5,705.61      0.18      2.53
 Chile IGPA                    28,696.76      0.21      2.56
 Argentina MerVal              32,351.20       0.5      7.60
 Colombia IGBC                 11,853.55       1.1      4.25
 Venezuela IBC                  1,270.56      0.55      0.59
 Currencies                       Latest     Daily   YTD pct
                                               pct    change
 Brazil real                      3.2406     -0.15      2.24
 Mexico peso                     19.2290     -0.30      2.44
 Chile peso                       605.38      0.07      1.53
 Colombia peso                   2,906.3     -0.03      2.60
 Peru sol                          3.215     -0.09      0.68
 Argentina peso (interbank)      19.0100     -0.58     -2.16
 Argentina peso (parallel)         19.53     -0.41     -1.54
 (Reporting by Bruno Federowski; Additional reporting by Flavia
Bohone and Daina Beth Solomon; Editing by Jonathan Oatis and
Rosalba O'Brien)
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