January 16, 2018 / 11:10 PM / a year ago

EMERGING MARKETS-Brazil stocks hit all-time highs on economic outlook

 (Updates prices, adds details from Mexico)
    By Bruno Federowski
    BRASILIA, Jan 16 (Reuters) - Brazilian stocks on Tuesday
edged up to an all-time high as optimism over the nation's
economic prospects kept an early-year rally alive.
    The benchmark Bovespa stock index closed up 0.1
percent at 79,831.8, after earlier breaching the 80,000 mark for
the first-time ever to hit 80,246.331.
    Demand for Brazilian assets has been underpinned by
expectations that stronger economic growth lifts corporate
earnings in 2018. Brazil's gross domestic product is expected to
grow almost 3 percent in 2018, strengthening a comeback from its
deepest recession in decades.
    Still, analysts say the positive outlook hinges on
policymakers' ability to plug a growing budget deficit and
implement market-friendly reforms as the nation heads into
wide-open presidential elections.
    "Insufficient progress towards fiscal consolidation could
potentially jeopardize the recently achieved gains in
macroeconomic performance and asset prices," Goldman Sachs
economist Alberto Ramos wrote in a report.
    Shares in petrochemical firm Braskem SA led gains
on the index after analysts at Itaú BBA upgraded their
recommendation on the stock to "outperform" from "market
    Foreign exchange markets saw limited moves, though the
Brazilian real fell 0.58 percent against the dollar after
rising over 3 percent in the first half of January.
    Mexico's peso strengthened for a second day on
hopes that U.S. President Donald Trump take a softer stance on
trade negotiations. The Mexican currency rallied on Monday
following a report that said Trump may be shying away from
terminating the North American Free Trade Agreement (NAFTA).
    Mexico sells around four-fifths of its exports to the United
States so it is particularly vulnerable to U.S. protectionism.
    The country's S&P/BMV IPC stock index rose by more than 0.2
percent, boosted by shares in airline Volaris, which rose by
almost 6 percent as it confirmed plans announced in November to
buy dozens of Airbus jets.
    Key Latin American stock indexes and currencies at 2230 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets               1217.87      0.6     5.13
 MSCI LatAm                          3001.29    -0.51     6.12
 Brazil Bovespa                     79831.76      0.1     4.49
 Mexico IPC                         49491.72     0.21     0.28
 Chile IPSA                          5745.95     0.22     3.26
 Chile IGPA                         28911.17     0.28     3.33
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2289    -0.58     2.61
 Mexico peso                         18.7710     0.38     4.94
 Colombia peso                          2863    -0.12     4.16
 Peru sol                               3.21     0.00     0.84
 Argentina peso (interbank)            18.88    -0.85    -1.48
 Argentina peso (parallel)             19.55     0.00    -1.64
 (Reporting by Bruno Federowski; Editing by Nick Zieminski and
Lisa Shumaker)
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