June 16, 2020 / 8:11 PM / 17 days ago

EMERGING MARKETS-Latam stocks rally on hopes of economic recovery; currencies weaken

    * Latam FX erase session gains; Brazil's real down 1.5%
    * Brazil's retail sales plunged at record pace in April
    * Chile's c.bank expected to hold rates
    * Argentina, Brazil see biggest rise in fiscal deficits in
EM- IIF

 (Updates prices, add comments)
    By Susan Mathew and Ambar Warrick
    June 16 (Reuters) - Latin American stocks joined a global
rally on Tuesday as hopes of more global stimulus and upbeat
U.S. data lifted sentiment, although most regional currencies
turned to losses as the dollar strengthened.   
    As the Dow Jones and S&P 500 indexes rose more than 2%,
Brazil's Bovespa stocks benchmark ended a four-day
losing run to rise 1.2%, while Mexican shares jumped
1.5%. 
    Colombian shares extended gains to a second
session, while Chile stocks rose 1.3%
    The U.S. Federal Reserve and Bank of Japan were among the
major central banks to unveil more stimulus this week, while
record U.S. retail sales and a report that Washington was
preparing a $1 trillion infrastructure proposal also boosted
sentiment.
    This helped emerging markets inch closer to three-month
highs hit earlier in June before fears of a second wave of
coronavirus infections dented sentiment. 
    "Markets love a good stimulus narrative," wrote Mark
McCormick, global head of FX strategy at TD Securities. But he
warned that "while liquidity and stimulus is king for now... the
world continues to deal with the growth in COVID-19."
    Argentina, Brazil and Hungary have suffered the biggest
increase in fiscal deficits in EM as a result of the pandemic,
the Institute of International Finance said. 
    Brazil's real erased session gains to fall 1.5%,
extending last session's steep losses set-off by the resignation
of Treasury Secretary Mansueto Almeida. While Bruno Funchal is
seen as a capable successor, markets are waiting to see if he is
as competent as Almeida in his political skill.
    Data also showed that Brazil's retail sales plunged at a
record pace in April, although analysts forecast a recovery with
the easing of coronavirus curbs.
    On Thursday, investors will be watching for Brazil's central
bank meeting. Sacha Tihanyi, deputy head of EM strategy at TD
Securities expects the bank to deliver a final cut of 50 basis
points to 2.5%, and shed light on the duration of time monetary
policy will be kept at extraordinary loose levels. 
    Chile's peso gave up early gains ahead of a central
bank meeting. The bank is widely expected to keep rates on hold
at 0.5%. 
    "However, with inflation and growth expectations being
revised downwards, the likelihood of additional unconventional
measures on the monetary policy front is on the rise," said
Citigroup EM strategists. 
    After gaining as much as 1.5% in the session, Mexico's peso
 fell 0.5%. Colombia's peso outperformed, up 1% as
oil prices rose.
    
    Key Latin American stock indexes and currencies at 1934 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     989.31     2.38
                                   
 MSCI LatAm               1942.17     1.93
                                   
 Brazil Bovespa          93480.32      1.2
                                   
 Mexico IPC              37989.29     1.53
                                   
 Chile IPSA               3942.50     1.27
                                   
 Argentina MerVal        42830.14   -1.352
                                   
 Colombia COLCAP          1156.80      1.2
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.2187    -1.49
                                   
 Mexico peso              22.3318    -0.53
                                   
 Chile peso                783.85    -0.16
                                   
 Colombia peso            3745.29     1.02
                                   
 Peru sol                  3.4808    -0.09
                                   
 Argentina peso           69.6100    -0.33
 (interbank)                       
                                   
 
 (Reporting by Ambar Warrick in Bengaluru; Editing by David
Gregorio and Andrea Ricci)
  
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