July 10, 2019 / 2:22 PM / 10 days ago

EMERGING MARKETS-Brazilian assets rise on pension prospects, U.S. Fed remarks

    By Sruthi Shankar
    July 10 (Reuters) - Brazil's real and stocks rose on
Wednesday due to government efforts to overhaul pension reform,
while dovish remarks by U.S. Federal Reserve chief sparked a
rally in riskier assets.
    The real rose nearly 1% to as much 3.7595 per dollar,
its highest level in over three months. The Colombian peso
, Chilean peso and the Argentine peso all
posted gains.
    Fed Chairman Jerome Powell said concerns about trade policy
and a weak global economy "continue to weigh on the U.S.
economic outlook" and reaffirmed the central bank stood ready to
"act as appropriate" to sustain a decade-long expansion.

    The comments reinforced expectations of an interest rate cut
from the Fed for the first time in a decade at its monetary
policy meeting later this month. Prospects of major central
banks embracing looser monetary policy to counter a global
growth slowdown has supported emerging markets this year.
    "There is now economic evidence that the outlook for the
U.S. economy is not that great. Ultimately what that means is
that the Federal Reserve will need to intervene, and they're
sounding dovish right now," said Juan Perez, senior currency
trader at Tempus Inc, Washington.
    Brazilian markets, which were closed on Monday due to a
holiday, were helped by optimism over the pension reform bill,
with the lower house of Congress set to begin voting on
Wednesday after it was pushed back a day due to political
bargaining between the government and opposition lawmakers.

    Speaker Rodrigo Maia determines when a vote occurs but will
only proceed when he is confident he has enough support in the
house, which is comprised of representatives of more than 20
political parties.
    The Bovespa rallied to a new record, surpassing the
105,000 level for the first time as sectors across the board
gained.
    Mexican assets bucked the trend, with the peso
falling 0.6%, adding to over 1% loss on Tuesday after the abrupt
resignation of the country's finance minister Carlos Urzua, who
cited "extremism" in economic policy and conflicts of interest
with other members of the government as reasons for leaving.

    Mexican President Andres Manuel Lopez Obrador, who appointed
deputy finance minister Arturo Herrera to replace him, said
Urzua had differences with the president's chief of staff and
businessman Alfonso Romo.
    "We take yesterday's surprise resignation to imply an
erosion in Mexico's fiscal orthodoxy that had been best
represented by the fiscally responsible 2019 budget," TD
Securities strategist Sacha Tihanyi wrote in a note.
    "This opens the door to fiscal slippage in the 2020 budget,
and crucially a lack of strong impetus to address the bubbling
Pemex "crisis", that we believe will lead to the second junk
rating on the oil company within 6-12 months." 

    Latin American stock indexes and currencies at 1919 GMT
    
 Stock indexes                       daily %
                            Latest    change
 MSCI Emerging Markets      1052.22     0.94
                                     
 MSCI LatAm                 2962.89     1.42
                                     
 Brazil Bovespa           105972.11     1.38
                                     
 Mexico IPC                42987.54     0.39
                                     
 Chile IPSA                 5062.65      0.2
                                     
 Argentina MerVal                --        -
                                     
 Colombia IGBC             12963.23     0.44
                                     
                                            
 Currencies                          daily %
                                      change
                             Latest  
 Brazil real                 3.7640     1.16
                                     
 Mexico peso                19.2745    -0.62
                                     
 Chile peso                  684.75     0.65
                                     
 Colombia peso              3210.50     0.19
                                     
 Peru sol                    3.2863     0.20
                                     
 Argentina peso             41.6000     0.60
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru; additional reporting
by Richard Leong in New York
Editing by Susan Thomas)
  
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