December 12, 2019 / 8:02 PM / a month ago

EMERGING MARKETS-Latam FX, stocks rally on upbeat trade news, dovish Fed

 (Adds reports of Sino-U.S. trade progress, updates prices)
    By Susan Mathew
    Dec 13 (Reuters) - Latin American assets firmed on Thursday,
with Brazil stocks at a record high as encouraging developments
on the U.S.-China trade front, and accommodative stances from
major central banks posited a risk-on sentiment that reflected
across global markets.
    MSCI's index of Latam shares rose more than
1% to its highest in five weeks, while its currency counterpart
 firmed 0.5%.
    The U.S. Federal Reserve and the European Central Bank both
held on rates and said they were likely to do so in the near
term. 
    Emerging markets, which have largely mimicked the Fed's
easing cycle this year, have found support from major central
banks adopting an accommodative stance in the face of an
economically damaging trade war between the United States and
China.   
    But, headlines on Thursday suggested trade negotiators were
making headway, with sources briefed on talks between the two
nations saying that a deal has been reached.
    Trump had tweeted earlier on Thursday that a deal with China
is very close, while The Wall Street Journal reported Washington
offered to cancel new tariffs on Chinese good due to take effect
on Dec. 15 and slash exiting tariffs on $360 billion.  
    "Having some kind of resolution, even if it's a small step,
is still a positive step," said Jin Zhang, portfolio manager &
senior research analyst at Vontobel Quality Growth. 
    "It reduces uncertainties both in the capital market and the
real economy because tariffs are a headwind for businesses. A
reduction of that is positive for global growth."    
    Against this backdrop, global stocks rallied. 
    Mexico stocks climbed 1.3%, while Brazil's benchmark
stock index touched a record high, rising 1%, with gains
on both being broad-based. 
    Brazil's central bank cut interest rates to a record low on
Wednesday, as expected and said it would likely pause on its
current easing cycle, which prompted the real to its
highest level against the dollar in more than one month.

    Data also showed Brazil's services activity expanded faster-
than-expected in October, indicating that certain facets of
Latin America's largest economy were recovering at a strong
pace.
    The Mexican peso was largely subdued, as industrial
output in the country fell 1.1% in October from the prior month,
and 3% from last year.    
    Colombia stocks rose almost a percent, while Chile
stocks extended gains into a fourth day. 
    Argentine markets had a tempered reaction on Thursday with
bond prices up, risk spreads down and the peso stable after
Economy Minister Martin Guzman laid out his vision for handling
the debt crisis in Latin America's No. 3 economy. 
       
    Key Latin American stock indexes and currencies at 1937 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1073.33      1.43
                                        
 MSCI LatAm                    2816.25      1.34
                                        
 Brazil Bovespa              112101.98      1.03
                                        
 Mexico IPC                   43195.19      1.32
                                        
 Chile IPSA                    4815.40      0.64
                                        
 Argentina MerVal             35014.35    -0.015
                                        
 Colombia COLCAP               1620.13      0.92
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.0928      0.64
                                        
 Mexico peso                   19.0875      0.14
                                        
 Chile peso                      769.2      0.09
                                        
 Colombia peso                 3371.75      0.07
 Peru sol                        3.375      0.50
                                        
 Argentina peso                59.8150      0.01
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Chizu Nomiyama)
  
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