EMERGING MARKETS-Latam stocks rise on hope for U.S. budget deal
* Obama, Boehner narrow differences on taxes for wealthy
* Foreign investors returning to Bovespa
* Brazil Bovespa gains 0.42 pct, Mexico IPC up 0.23 pct
By Asher Levine and Danielle Assalve
SAO PAULO, Dec 18 (Reuters) - Latin American stocks rose on Tuesday as signs of progress in U.S. budget negotiations boosted appetite for riskier assets.
Mining firms and steelmakers drove Brazil's Bovespa index to its second gaining session in three, while Mexico's IPC index reached a new record high.
Shares rose after President Barack Obama on Monday moved closer to Republican House of Representatives Speaker John Boehner in budget negotiations over tax rates for high earners. Boehner said Tuesday that Obama's most recent offer was "not there yet" but said he still hopes he can reach a deal with the White House. [ID:nL1E8NI58}
Both sides need to reach an agreement to avert the "fiscal cliff" of automatic tax hikes and spending cuts that would kick in next year, fears of which have weighed on demand for Latin American equities.
"There is expectation that they will reach an accord this year, which is cheering up the market," said Felipe Rocha, an analyst with Omar Camargo Corretora in Curitiba, Brazil. "It's still not totally priced in yet, though, so if an agreement is reached, stocks have space to gain a bit more."
Brazil's benchmark Bovespa stock index rose 0.42 percent to 59,818.63, a level it hasn't closed above in two months.
Preferred shares of iron-ore mining firm Vale SA contributed most to the index's rise, climbing 1.1 percent, while steelmaker Usinas Siderurgicas de Minas Gerais SA , known as Usiminas, gained 3.32 percent.
Shares of state-controlled oil company Petrobras rose 0.4 percent despite a decision by credit ratings company Moody's Investors Service to revise the outlook on the company's A3 credit rating to "negative" from "stable" on Monday.
The shares, which tend to attract foreign investors looking for exposure to Brazilian stocks due to their high liquidity, remained in positive territory due to the general increase in risk appetite on Tuesday, Rocha added.
Net foreign investor flows into the Sao Paulo stock market reached 1.43 billion reais ($682.4 million) for the first two weeks of December, the stock market said Tuesday. Year-to-date, however, there has been a net foreign investor outflow of 463.2 million reais.
Foreign investors are cautiously stepping back into Brazilian equities after fears of government intervention in the private sector and worries over stagnant economic growth led them away in recent months.
"As worries over government intervention get priced in better and as the situation in Europe clears up a bit...it changes risk perception and allows foreigners to up their bets on the growth in our economy," said Daniel Garcia, retail trading manager with Corretora Souza Barros in Sao Paulo.
Shares of JBS SA, the world's largest meatpacker, rose 1.6 percent after analysts at BTG Pactual Group upped their price target for the stock on Tuesday, citing management's effective reduction of the company's debt.
Mexico's IPC index gained for the third session in four, adding 0.23 percent and reaching a record-high 43,436.67 points.
A technical indicator known as the relative strength index rose to its most "overbought" level since mid-July, however, indicating stocks may be due to fall in coming sessions.
Lender Grupo Financiero Banorte rose 1.37 percent, contributing most to the index's gains, while bottling group Femsa added 0.43 percent.
Shares of retailer Wal-Mart de Mexico dropped 1.86 percent after the New York Times reported on Monday that the firm routinely used bribes to open stores in desirable locations.
Chile's IPSA index was little changed at 4,282.85 points as a 0.84 percent gain by retailer Cencosud was partially offset by a 0.37 percent loss by regional energy group Endesa.
($1 = 2.0955 Brazilian reais)
Latin America's key stock indexes at 1508 GMT:
Stock indexes daily % YTD %
Latest change change MSCI LatAm 3,740.48 0.1 3.73
Brazil Bovespa 59,818.63 0.42 5.40
Mexico IPC 43,436.67 0.23 17.15
Chile IPSA 4,282.85 0.07 2.52
Chile IGPA 20,935.48 0.04 4.00
Argentina MerVal 2,801.10 1.51 13.74
Colombia IGBC 14,600.20 0.06 15.27
Peru IGRA 20,215.96 0.26 3.81
Venezuela IBC 476,415.25 0 307.07
(Editing by W Simon)
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