January 16, 2020 / 2:55 PM / 8 days ago

EMERGING MARKETS-Latam assets firm as investors assess U.S.-China trade deal

    * U.S., China sign Phase 1 trade deal on Wednesday
    * Investors cautious about lasting truce
    * Brazil's real firms on pickup in economic activity
    * Mexican peso, Argentine peso, Peruvian sol muted

    By Sagarika Jaisinghani and Ambar Warrick
    Jan 16 (Reuters) - Latin American assets rose on Thursday as
China pledged to boost purchases of U.S. goods and services in
the two countries' Phase 1 trade deal, while
stronger-than-expected economic activity in Brazil lifted the
real.
    A basket of Latin American stocks rose about
0.4%, while its counterpart tracking currencies
added 0.1%.
    Both indexes had declined on Wednesday as weak economic data
from Brazil, the region's biggest economy, overshadowed broader
optimism about the trade truce between Washington and Beijing.
    On Thursday, the Brazilian real was up about 0.3% as
new figures showed economic activity in November rose for the
fourth month in a row.
    Investor nerves were also soothed by comments from China's
Vice Premier Liu He that other suppliers of agricultural
commodities would not be impacted by the Sino-U.S. trade deal.
China is Brazil's biggest market for soybeans.
    "(The real) has strengthened a bit today, but that came on
the back of a lot of weakness yesterday," said William Jackson,
chief emerging markets economist at Capital Economics in London.
    Jackson added that persistently weak economic indicators in
Brazil set the stage for another interest rate cut at the next
central bank meeting in early February, after four consecutive
reductions in 2019.
    All eyes are now on the second phase of negotiations between
Washington and Beijing that will seek to resolve structural
economic issues that led to the tariff dispute in 2018.
    Analysts said China's target of $200 billion in additional
purchases, covering energy, farm and manufacturing products,
also appears daunting.
    "It's a bit of a warning sign, where we're not escalating
anymore, but things aren't exactly improving," said Win Thin,
head of emerging market currency strategy at Brown Brothers
Harriman.
    "It's positive for EMs, but I think we've gotten a lot of
big moves in EM already and further gains will be tough going
forward," he said.
    The Chilean peso rose 0.4% versus the dollar, a day
after President Sebastian Pinera said he would send a bill to
Congress this week to reform the country's pension system, which
has been the focus of months of demonstrations.
    The Mexican peso and the Peruvian sol were
trading flat, tracking the mood in global currency markets.

    Argentina's peso was also muted, as data showed
consumer prices rose 53.8% in 2019, marking the biggest increase
in 28 years and posing a major challenge for the new president
as he tackles soaring inflation in Latin America's No. 3
economy.    
    
    Key Latin American stock indexes and currencies at 1428 GMT:
   
     Stock indexes              Latest      Daily % change
 MSCI Emerging Markets           1140.77                0.25
                                          
 MSCI LatAm                      2880.59                0.35
                                          
 Brazil Bovespa                116910.96                0.43
                                          
 Mexico IPC                            -                   -
                                          
 Chile SPIPSA                          -                   -
                                          
 Argentina MerVal               41675.78               1.042
                                          
 Colombia Colcap                       -                   -
                                          
                                                            
        Currencies              Latest      Daily % change
 Brazil real                      4.1700                0.33
                                          
 Mexico peso                     18.7910               -0.04
                                          
 Chile peso                        771.8                0.44
                                          
 Colombia peso                   3302.93               -0.21
 Peru sol                         3.3208                0.07
                                          
 Argentina peso (interbank)      59.9600                   -
                                          
 
 (Reporting by Sagarika Jaisinghani in Bengaluru; editing by
Jonathan Oatis)
  
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