June 4, 2020 / 2:40 PM / a month ago

EMERGING MARKETS-Latam stocks weaken as risk rally pauses

    By Susan Mathew
    June 4 (Reuters) - Latin American stocks fell on Thursday
and Mexico's peso eased off 12-week highs as a recent rally in
risk assets on hopes of an economic recovery lost steam.
    MSCI's index of Latam stocks broke a
three-day winning streak, with Brazil's Bovespa Mexico's
IPC index both giving up about half a percent.
    But "the rally could have another leg higher, especially as
the dollar looks to be on a downward trajectory, which may be a
sign that investors are growing more optimistic and increasing
their risk exposure," said Hussein Sayed, chief market
strategist at FXTM. 
    Monetary and fiscal stimulus, increasing business activity
around the globe and data showing improvement in some economic
indicators lifted sentiment this week.   
    Brazil's real broke a two-day super rally when it
gained about 5%, to trade 0.7% lower. The central bank on
Wednesday signaled that policymakers may be prepared to cut
interest rates more than they have previously indicated.

    A Reuters poll showed that along with broader emerging
market peers, Latam currencies are on a recovery path but depend
heavily on calmer domestic politics and signs of economic
recovery.   
    Brazil is moving aggressively to open its economy even as it
posts a record number of coronavirus related deaths. Latin
America has become a hot spot in the outbreak, with Brazil in
No. 2 spot globally in number of infections; Mexico overtook the
United States in daily reported deaths this week.

    Mexico's peso fell 0.5% against a steady dollar as
oil prices declined.
    The country's mining chamber on Wednesday said output will
likely fall by about 17% in 2020. Mexico had restarted the
mining industry last month after deeming it an essential sector.

    Chile's peso gained 2% a day after the country's
central bank said it would gradually scale back its foreign
exchange intervention program in the non-deliverable forward
markets and speak with its U.S. and Chinese counterparts to
broaden the country's foreign exchange lines.   
    "We expect the CLP to underperform its peers in the near
term as the (central bank) buys dollars, although we think it is
likely to continue trading with the broad macro environment and
find support from (U.S.) Treasury sales," said Citigroup
analysts.
        
    Key Latin American stock indexes and currencies at 1400 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     987.52    -0.05
                                   
 MSCI LatAm               1951.68    -2.29
                                   
 Brazil Bovespa          92521.29    -0.52
                                   
 Mexico IPC              38095.87    -0.51
                                   
 Chile IPSA               3810.69    -0.57
                                   
 Argentina MerVal            0.00        0
                                   
 Colombia COLCAP          1153.08    -0.43
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.1370    -1.05
                                   
 Mexico peso              21.8732    -0.53
                                   
 Chile peso                 775.3    -0.64
                                   
 Colombia peso            3598.11     0.22
                                   
 Peru sol                  3.4168    -0.44
                                   
 Argentina peso           68.8800    -0.10
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru; editing by Jonathan
Oatis)
  
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