June 8, 2020 / 2:27 PM / a month ago

EMERGING MARKETS-Latam stocks surge on hopes of faster economic recovery

    By Susan Mathew
    June 8 (Reuters) - The currencies of Brazil and Mexico hit
12-week highs in volatile trade against a weaker dollar on
Monday, and Latin American stocks rose as risk assets continued
a rally on hopes of a quicker economic recovery.
    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%. 
    Colombian shares gained as much as 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 0.6%, as oil prices slipped after the Gulf
producers ended voluntary cuts. 
    Mexico's peso swung wildly in either direction, while
Brazil's real strengthened 1%. 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
    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 remained
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 at 1411 GMT:
  Stock indexes           Latest   Daily %
 MSCI Emerging Markets    1006.47     0.38
 MSCI LatAm               2086.36     1.52
 Brazil Bovespa          96113.87     1.56
 Mexico IPC              39365.35     1.07
 Chile IPSA               4042.09     0.21
 Argentina MerVal               -        -
 Colombia COLCAP          1221.84     1.56
      Currencies          Latest   Daily %
 Brazil real               4.9440     0.86
 Mexico peso              21.6303    -0.21
 Chile peso                 768.2     0.10
 Colombia peso            3588.96    -0.58
 Peru sol                  3.4267     0.09
 Argentina peso           69.0700    -0.12
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell)
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