June 4, 2019 / 8:00 PM / 4 months ago

EMERGING MARKETS-Latam FX firms, Mexican peso claws back some ground

 (Recasts with Latin American currencies; updates prices; adds
market strategists' quote)
    By Aaron Saldanha
    June 4 (Reuters) - Latin American currencies firmed on
Tuesday against a softer dollar, and Mexico's peso outperformed
most regional peers, after U.S. Federal Reserve Chairman Jerome
Powell alluded to the possibility of cutting borrowing costs.
Stocks across Latin America gained modestly. 
    Powell said the Fed will respond "as appropriate" to trade
and other headwinds and that it was "closely monitoring the
implications" of the trade dispute. A rate cut, if delivered,
would greatly support developing world assets.

    MSCI's index of Latin American currencies
gained 1.2%, while its Latin American stocks index
 rose 1.3%.
    Assets in Mexico found support as the perceived likelihood
of U.S. President Donald Trump's threat to slap tariffs on the
country dimmed. U.S. Senate majority leader Mitch McConnell said
there was "not much support" among other Republicans for the
tariffs.
    "The two countries can resolve the issue, in our view," Dirk
Willer, head of emerging market strategy at Citi Research, and
Kenneth Lam, an emerging markets FX strategist, wrote in a note.
Wednesday's meeting between Mexico's foreign minister, Marcelo
Ebrard, and U.S. Secretary of State Mike Pompeo "will be very
important, and we believe that it will be an amicable meeting."
    Mexico's peso surged 1.2%, set for its best day since
early 2019, while stocks edged up as gains among
financials were largely negated by losses in industrials.
    Yields on local Mexican 10-year bonds fell 7
basis points to 8.01%, while the spread - or surplus yield -
between those bonds and their U.S. peers distanced
itself from the 4-1/2 month-peak hit on Monday.       
    Brazil's real firmed 0.8%, as comments made by
Economy Minister Paulo Guedes fanned optimism among investors.
    Guedes said the government will press ahead on a number of
fronts, including pension reform and privatizations, to fill the
fiscal "black hole." 
    Brazilian stocks rose 0.2%, aided by gains among
financials, consumer staples and energy stocks.
    Common shares and preferred shares of
state-run oil firm Petroleo Brasileiro SA (Petrobras) rose 0.4%
and 0.6%, respectively, helped by a 1.1% rise in Brent crude
futures.
    Argentina's stocks tacked on 1.9%, while the peso
 firmed 0.5%. 
    Chile's peso rose 1.4%, outpacing a rise in the price
of copper, the country's top export.        
    Colombia's peso strengthened 2.6%, while stocks
 rose 0.6%. Energy firm Ecopetrol SA rose 1.8%,
aided by strong oil futures.

    Latin American stock indexes and currencies at 1904 GMT
    
 Stock indexes                             daily
                                               %
                                Latest    change
 MSCI Emerging Markets           1006.42   -0.19
                                          
 MSCI LatAm                      2728.89    1.34
 Brazil Bovespa                 97186.85    0.17
 Mexico IPC                     43134.82    0.06
 Chile IPSA                      5017.18    0.07
                                          
 Argentina MerVal               34400.47    1.88
 Colombia IGBC                  12131.06    0.63
                                                
 Currencies                                daily
                                               %
                                          change
                                  Latest  
 Brazil real                      3.8553    0.86
                                          
 Mexico peso                     19.5470    1.14
                                          
 Chile peso                        693.1    1.23
 Colombia peso                   3290.33    2.49
 Peru sol                          3.348    0.36
                                          
 Argentina peso (interbank)      44.7000    0.45
                                          
 


($1 = 3.8523 reais)

 (Reporting by Aaron Saldanha in Bengaluru
Editing by Leslie Adler)
  
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