May 20, 2020 / 3:47 PM / 6 days ago

EMERGING MARKETS-Most Latam FX, stocks rally on hopes of strong recovery

    * Mexican peso hits highest since mid-April 
    * Colombian peso at 10-week high, Chilean peso hits 11-week
high
    * Stocks rally on hopes of strong first half in 2021 
    * Negotiators with creditors may extend beyond May 22 -
Argentina

    By Susan Mathew
    May 20 (Reuters) - A rally in commodity prices lifted Latin
American stocks and currencies on Wednesday, with Mexico's peso
 hitting a five-week high, as markets looked to a strong
post-pandemic recovery.
    In line with a rally on Wall Street, most regional bourses
traded between 0.% and 1.7% higher, although Mexican stocks
 extended losses after posting their worst session in
almost two months on Tuesday as new rules for the electricity
sector increased tensions between the private sector and
government.
    "The stock market is seeing the first and second quarters of
2021 as having very good results. Meaning the bounce back," said
Robert Lutts, president and chief investment officer at Cabot
Wealth Management Inc.
    "We're going to be past a lot of the troubles with COVID-19
by then and economies are going to be much more open, and we're
going to a see a hidden benefit from this whole crisis:
Companies are going to be much more efficient." 
    Brazilian airline Azul shot up almost 16% on plans
to increase daily flights by 46% in June compared with May.
Other major gainers were oil giant Petrobras and iron
ore miner Vale.   
    Latin American currencies firmed against a weaker dollar
despite a surging number of new COVID-19 cases in the region's
largest economy, Brazil, where the political picture became
cloudier after yet another resignation from President Jair
Bolsonaro's government.
    Culture Secretary Regina Duarte resigned after roughly two
months in the post, citing personal reasons. This followed
resignations by the justice minister, as well as the newly
appointed health minister following his predecessor's ouster in
April.
    Against a weaker dollar, Brazil's real rallied 1.5%.
As oil prices surged, Mexico's peso rose 1.7%, while
Colombia's currency hit a 10-week high. Higher copper
prices propelled Chile's peso to its highest in 11 weeks.

    But given the bleak near-term future, demand for real assets
like gold could keep currencies on the back foot, said
Lutts.
    Recent economic data from the region has been dismal as
lockdowns hit economic activity. Analysts increasingly revise
expectations lower. 
    "(Brazil) Activity data are likely to post new record
declines in April," said Wilson Ferrarezi, an economist at TS
Lombard.
    "Some sectors may not begin to recover before early 2021,
especially as demand remains subdued amid rising unemployment.
This, coupled with mounting political uncertainty, will further
hinder any rebound in consumer and business sentiment."
    In Argentina, there is a "big chance" for negotiations with
creditors to extend beyond a May 22 deadline, Finance Minister
Martin Guzman said, assuring "constructive" dialogue between
parties.
    
    Key Latin American stock indexes and currencies at 1458 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     934.23     0.97
                                   
 MSCI LatAm               1643.68     2.21
                                   
 Brazil Bovespa          82152.42     1.75
                                   
 Mexico IPC              35613.80    -0.69
                                   
 Chile IPSA               3751.94     0.59
                                   
 Argentina MerVal        39964.25    1.461
                                   
 Colombia COLCAP          1066.86    -0.07
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.6720     1.54
                                   
 Mexico peso              23.2760     1.74
                                   
 Chile peso                   807     1.34
                                   
 Colombia peso            3799.48     0.86
                                   
 Peru sol                  3.4047     0.63
                                   
 Argentina peso           67.9900    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru; editing by Jonathan
Oatis)
  
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