May 18, 2020 / 8:36 PM / 16 days ago

EMERGING MARKETS-Latam assets surge as commodity prices rally

    * Brazilian real leads gains among Latam peers
    * Mexican peso hits more than four-week high
    * Argentine peso touches fresh low against dollar 

 (Adds comments, updates prices)
    By Shreyashi Sanyal and Susan Mathew
    May 18 (Reuters) - Latin American assets roared higher on
Monday, with Brazil's real jumping as commodity prices surged on
hopes of economic recovery as countries eased pandemic-induced
    Encouraging data from a COVID-19 vaccine trial by U.S.
drugmaker Moderna added to the optimism, bolstering
Wall Street's rally.
    Brazil's real added 2.2%, while currencies of other
oil exporters Mexico and Colombia firmed between
1% and 1.7%, with the Mexican peso touching a more than
four-week high.
    Despite worrying rises in the number of new cases in
emerging markets, especially Brazil, and simmering U.S.-China
trade tensions, an index of Latam stocks jumped
6%. Its currency counterpart surged 1.4% after
both indexes ended lower last week.    
    Oil firms Petrobras and Ecopetrol
 climbed 9.7% and 6.2%, respectively, as crude prices
rose, while iron ore miner Vale jumped 6.6%.
    Chile, the world's largest producer of copper, saw its peso
 climb 1%, while stocks were on track for their
biggest daily gain in a month. Copper prices surged 2%. 
    Outbreak hot spots such as Italy reopened shops and
restaurants, while New York and Spain plan to lift restrictions 
gradually. In Mexico, automotive, mining and construction
sectors will be told in 72 hours if they can resume operations,
the government said.
    But the regional picture remained grim, with a central bank
survey showing Brazil's economy is expected to shrink by more
than 5% this year.
    The political scenario in Brazil remained precarious too,
with Health Minister Nelson Teich resigning on Friday, as he and
President Jair Bolsonaro showed themselves increasingly out of
step, with Bolsonaro calling for a rollback of state quarantines
and for the widespread use of unproven drugs, such as
chloroquine, to fight the virus. 
    Teich is the second minister to leave a post in Bolsonaro's
government after Justice Minister Sergio Moro quit last month
over differences with the president. 
    "Having lost both his influential health minister and
justice minister in recent weeks, the market wonders whether
Bolsonaro's government is losing its way, potentially derailing
efforts at structural economic reform," said Nicholas Mason,
fund manager at Invesco. 
    Argentina's peso marked a fresh low against the
dollar with risk of a sovereign debt default looming. Argentina
received three new counter-offers from creditors late on Friday
with the deadline to restructure $65 billion in foreign debt
lapsing this coming Friday.
    "We believe the authorities will continue to signal progress
in the negotiations, with talks continuing after the
aforementioned deadline, to limit the economic impact of a
default," said analysts at Citi Research.      
    Key Latin American stock indexes and currencies at 2025 GMT:
    Stock indexes                Latest        Daily %
 MSCI Emerging Markets               912.57          1.27
 MSCI LatAm                         1632.00          5.91
 Brazil Bovespa                    81194.29          4.69
 Mexico IPC                        37005.50          3.68
 Chile IPSA                         3763.02          3.89
 Argentina MerVal                  40286.72         2.281
 Colombia COLCAP                    1082.96          2.77
        Currencies               Latest        Daily %
 Brazil real                         5.7220         -0.03
 Mexico peso                        23.7510          0.75
 Chile peso                           820.7          0.67
 Colombia peso                         3851          1.40
 Peru sol                            3.4268          0.26
 Argentina peso                     67.8100         -0.12

 (Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru;
Editing by Dan Grebler and Tom Brown)
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