July 3, 2020 / 8:03 PM / a month ago

EMERGING MARKETS-Oil-linked Latam currencies outperform for week

    * Colombian, Mexican pesos lead weekly gains
    * Chilean stocks outperform for the week
    * Argentine assets sole losers for the week

 (Updates prices, adds comments)
    By Ambar Warrick and Shreyashi Sanyal
    July 3 (Reuters) - Latin American stocks and currencies
remained muted on Friday as a U.S. holiday provided few trading
cues, but were set to end the week with gains as bets grew for a
recovery from the economic effects of the COVID-19 pandemic. 
    Strong economic readings from China and the United States
through the week had helped bolster risk appetite, although a
drastic rise in coronavirus cases capped broader gains.
    Still, the positive news drove gains in commodity markets,
which in turn saw oil and metal-linked assets in Latin America
outperform for the week. It also helped regional risk assets
weather a raft of weak local economic data.    
    The currencies of oil exporters Colombia and Mexico
 were set to outperform regional peers for the week,
riding on strength in the crude market as bets for demand
recovery grew.
    
    "Following a precipitous decline in global and emerging
markets activity in Q2, we expect growth across EM economies to
bounce back relatively sharply towards the end of this year and
into 2021," analysts at Goldman Sachs wrote in a client note.  
    Brazil's real edged up for the day, while stocks
 fell after data showed economic activity in the country
shrank in June for a fourth straight month due to coronavirus.
    The reading was slightly stronger than the prior month, as
Latin America's largest economy slowly ground back into gear
from coronavirus-related lockdowns.
    The real and Brazilian stocks added 3% for the week.
    Copper exporter Chile's stocks outperformed
regional peers for the week with a 5.3% gain. The peso
had also benefited from stronger copper prices through the week.
    Still, economic activity in the world's largest copper
producer remained constrained due to the coronavirus.
    Investors continued to watch for increasing infections as
major economies scaled back virus-related curbs. While reopening
has helped economic activity recover, it also leaves the door
open for future lockdowns if infections continue to spike.
    "This is not a 'bubble, burst bubble, sort out bubble,
recover' cycle. This is an abrupt switching off of economies,
followed by a relatively abrupt switching back on. Companies and
consumers are not likely to react as they have in the past,"
wrote Paul Donovan, Chief Economist of UBS Global Wealth
Management.
    Argentine stocks and the peso were the sole
weekly losers in Latin America. Investors continued to fret over
the country's negotiations over the repayment of its distressed
bonds, with a deadline for a deal looming later in the month.
    Key Latin American stock indexes and currencies at 1957 GMT:
    
     Stock indexes             Latest    Daily %
                                          change
 MSCI Emerging Markets          1033.29      0.96
                                         
 MSCI LatAm                     1954.72      0.74
                                         
 Brazil Bovespa                96657.46      0.44
                                         
 Mexico IPC                    37812.52     -0.22
                                         
 Chile IPSA                     4203.80      0.64
                                         
 Argentina MerVal              39819.67     0.807
                                         
 Colombia COLCAP                1127.36      0.75
                                         
                                                 
        Currencies             Latest    Daily %
                                          change
 Brazil real                     5.3199      0.53
                                         
 Mexico peso                    22.3840      0.36
                                         
 Chile peso                       802.4     -0.11
                                         
 Colombia peso                  3644.53     -0.01
 Peru sol                        3.5387     -0.51
                                         
 Argentina peso (interbank)     70.6300     -0.07
                                         
 Argentina peso (parallel)          123      4.88
                                         
 

    
 (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru;
Editing by Alistair Bell and Daniel Wallis)
  
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