January 16, 2018 / 2:05 PM / a year ago

EMERGING MARKETS-Brazil stocks hit all-time highs on economic outlook

    By Bruno Federowski
    BRASILIA, Jan 16 (Reuters) - Brazilian stocks on Tuesday
edged up to an all-time high as optimism over the nation's
economic prospects kept an early-year rally alive.
    The benchmark Bovespa stock index rose 0.3 percent
to 79,951, nearing the 80,000 milestone for the first-time ever.
    Demand for Brazilian assets has been underpinned by
expectations that stronger economic growth lifts corporate
earnings in 2018. Brazil's gross domestic product is expected to
grow almost 3 percent in 2018, turning the page on its deepest
recession in decades.
    Still, analysts say the positive outlook hinges on
policymakers' ability to plug a growing budget deficit and
implement market-friendly reforms as the nation heads into
wide-open presidential elections.
    "Insufficient progress towards fiscal consolidation could
potentially jeopardize the recently achieved gains in
macroeconomic performance and asset prices," Goldman Sachs
economist Alberto Ramos wrote in a report.
    Shares in petrochemical Braskem SA led gains on
the index after analysts at Itaú BBA upgraded their
recommendation on the stock to "outperform" from "market
    Embraer SA rose slightly after the planemaker hit
its output targets for 2017, although fourth-quarter deliveries
fell sharply from the year before.
    Foreign exchange markets saw limited moves, with the
Brazilian real nearly flat. The Mexican peso
rose for a second day on hopes that U.S. President Donald Trump
take a softer stance on trade negotiations.
    The Mexican currency rallied on Monday following a report
that said Trump may be shying away from terminating the North
American Free Trade Agreement (NAFTA).
    Mexico sells around four-fifths of its exports to the United
States so it is particularly vulnerable to increased U.S.
    Key Latin American stock indexes and currencies at 1350 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets               1218.47     0.65     4.51
 MSCI LatAm                          3011.39    -0.18     6.67
 Brazil Bovespa                     79951.28     0.25     4.65
 Chile IPSA                          5745.95     0.22     3.26
 Chile IGPA                         28911.17     0.28     3.33
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2157    -0.19     3.04
 Mexico peso                         18.7895     0.28     4.84
 Colombia peso                        2859.8    -0.01     4.27
 Peru sol                              3.211    -0.03     0.81
 Argentina peso (interbank)          18.7350     0.03    -0.72
 Argentina peso (parallel)             19.56    -0.10    -1.69
 (Reporting by Bruno Federowski; Editing by Nick Zieminski)
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