June 8, 2020 / 7:03 PM / a month ago

EMERGING MARKETS-Latam stocks surge; Brazil's real at near 3-month high

    * Brazil stocks extend gains to seventh straight session
    * Mexican, Colombian pesos track weaker oil prices
    * U.S. Fed meet in focus

 (Updates prices)
    By Susan Mathew and Ambar Warrick
    June 8 (Reuters) - Brazil's real extended gains to hit a
near 12-week high on Monday, while most other currencies
retreated from bumper gains made last week as markets held out
for a recovery from the coronavirus.
    Still, regional stocks rallied further as gains on Wall
Street inspired more confidence in equities, even as the toll of
the virus in Latin America grew.
    Increasing business activity, more stimulus measures and a
surprisingly upbeat U.S. jobs data were among the factors
keeping a risk rally going since last week, even as the number
of coronavirus cases neared 7 million with Latam being the
latest epicenter. 
    Brazil's Bovespa index extended gains to a seventh
straight session staying near three-months highs, while Mexican
shares rose 1.4%. 
    Colombian shares gained 2%. The government could
take stakes in businesses struggling because of the coronavirus
outbreak in a bid to help them continue to operate, a
presidential decree published on Friday said.
    The country's currency, however, broke a five-session
winning streak down 1.1%, as oil prices slipped after the Gulf
producers ended voluntary cuts. 
    Mexico's peso also trended down, while copper
producer Chile's peso tracked the metal's prices lower.

    Outcome of the U.S. Federal Reserve's two-day meeting will
be watched for this week.
    "More stimulus, not less, remains our expectation for the
months ahead," said James Knightley, chief international
economist at ING, expecting the Fed to give a more nuanced
assessment, warning of many potential potholes in the road
ahead.
    While most analysts see recovering commodity prices in the
second half of the year helping Latam currencies, strategists at
JP Morgan add positive balance of payments dynamics to the list.
    They expect the improved BoP dynamic to last till the start
of the third quarter, and stay over-weight on Latam currencies
via the Mexican peso. 
    But the near-term outlook for regional economies remains
grim. Latin America's largest economy, Brazil, is now expected
to shrink by 6.5% this year, a central bank survey showed, worse
that a previous expectation of a 6.25% contraction. A similar
survey in Argentina also saw expectations for a steeper
contraction than previously expected.
    Mexico, meanwhile, is facing its deepest recession in
decades and prominent investors believe it could soon follow
state oil company Pemex in seeing its credit rating relegated to
"junk" territory as the pandemic rages on.
        
    Key Latin American stock indexes and currencies:
    
    Stock indexes             Latest    Daily % change
 MSCI Emerging Markets         1008.28             0.56
                                        
 MSCI LatAm                    2124.63             3.38
                                        
 Brazil Bovespa               97144.39             2.65
                                        
 Mexico IPC                   39500.92             1.42
                                        
 Chile IPSA                    4145.82             2.79
                                        
 Argentina MerVal             48020.37            6.407
                                        
 Colombia COLCAP               1227.58             2.04
                                        
                                                       
       Currencies             Latest    Daily % change
 Brazil real                    4.8785             2.21
                                        
 Mexico peso                   21.5960            -0.05
                                        
 Chile peso                      768.4             0.08
                                        
 Colombia peso                 3608.74            -1.12
 Peru sol                       3.4347            -0.14
                                        
 Argentina peso                69.0700            -0.12
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell and Richard Chang)
  
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