October 25, 2019 / 8:17 PM / 20 days ago

EMERGING MARKETS-Trade optimism lifts Latam currencies, Argentine election awaited

 (Updates market price)
    By Sruthi Shankar
    Oct 25 (Reuters) - Signs of progress in U.S.-China trade
talks helped most Latin American currencies firm on Friday, with
Mexico's peso set to record its fourth straight week of gains
amid optimism over a revamped trade deal with the United States
and Canada.
    The peso rose 0.3% to 19.06 per dollar, it strongest
level in nearly three months, while the Brazilian real,
the Colombian peso rose 0.8% and 0.3%, respectively.
    A senior Mexican official said the country expects U.S.
lawmakers to soon begin the formal process of approving the
United States-Mexico-Canada trade deal now that President Andres
Manuel Lopez Obrador has promised wage increases and funding for
labor reforms.
    The USMCA, signed last year, must win approval in a divided
U.S. Congress where Democrats have voiced concerns over the
agreement, including its labor and enforcement provisions.
    Adding to overall optimism, the U.S. Trade Representative's
office said U.S. and Chinese trade officials were "close to
finalizing" some parts of an agreement. U.S. President Donald
Trump has said he hopes to sign the deal with China's President
Xi Jinping next month at a summit in Chile.
    "At the height of trade escalation and uncertainty over the
summer, the bias of the market seemed to be towards concern and
defensiveness," Morgan Stanley's Hans Redeker wrote in a client
note.
    "Now, the bias, all else equal, seems to be towards risk,
calm and carry. The USD sell-off should continue, and we retain
our bullish EMFX bias – particularly high-yielders like INR, RUB
and MXN."
    The real was set to post gains of more than 2.5% for the
week, mainly driven by the Brazil Senate's final approval of a
pension reforms bill. Investors will closely watch the central
bank meeting next week, with expectations of a deep interest
rate cut running high after a series of weak data. 
    One of the most keenly monitored events in Latin America
over the weekend will be general elections in Argentina on
Sunday, with populist-leaning candidate Alberto Fernandez
expected to breeze past business-friendly President Mauricio
Macri. 
    Argentina's battered peso weakened 0.3%, even after
the central bank intervened heavily to ease its fall. The peso
crashed in August when Fernandez trounced Macri in the
presidential primary.
    A group of Argentina's largest bond holders have begun
forming a "creditor committee" in preparation for debt
negotiations after the country's elections, sources told
Reuters. 
    Among stocks, Brazil's Bovespa index scaled yet
another lifetime high as investors parsed through a batch of
earnings reports. 
    State oil firm Petrobras rallied after
saying some of its costs in a key oil-producing region plunged
in the third quarter. The firm reported quarterly net income
significantly lower than the previous quarter partly because of
already announced one-off charges. 
    Miner Vale rose 3.7% despite reporting a
weaker-than-forecast rise in quarterly earnings, with analysts
citing its strong cash flow, which they said cut its debt to an
11-year low.
    Brewer Ambev slumped after reporting a 9.7% fall
in third-quarter net profit.
    In Mexico, the benchmark index dropped 0.7% as  index
heavyweight Grupo Financiero Banorte's third
quarter results fell short of analysts' estimates.

    Broadcaster Grupo Televisa rallied 7% after
company executives expressed frustration with the low share
price and said they would explore stepping up buybacks.

    
    Key Latin American stock indexes and currencies at 1938 GMT:
    
       Stock indexes                 Latest    Daily % change
 MSCI Emerging Markets                1036.32           -0.11
 MSCI LatAm                           2798.95           -0.14
 Brazil Bovespa                     107395.02            0.38
 Mexico IPC                          43452.76           -0.74
 Chile IPSA                           4943.85           -1.42
 Argentina MerVal                    34230.45           2.253
 Colombia IGBC                       13213.90            0.48
                                                             
           Currencies                Latest    Daily % change
 Brazil real                           4.0103            0.81
 Mexico peso                          19.0674            0.31
                                               
 Chile peso                            726.55           -0.38
 Colombia peso                           3394            0.30
 Peru sol                               3.335            0.38
 Argentina peso (interbank)           59.9800           -0.30
                                               
 
 (Reporting by Sruthi Shankar and Susan Mathew in Bengaluru;
Editing by Alistair Bell and Tom Brown)
  
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