July 24, 2019 / 8:29 PM / a month ago

EMERGING MARKETS-Trade optimism lifts Latam markets; Brazil cheers stimulus

 (Updates with market close)
    By Agamoni Ghosh and Sruthi Shankar
    July 24 (Reuters) - Latin American markets rose on Wednesday
as optimism from U.S.-China trade talks offset concerns of
slowing global growth, while a new policy to control Brazil's
fiscal woes and provide stimulus to the economy boosted
sentiment.
    White House economic adviser Larry Kudlow said on Tuesday it
was a good sign that top U.S. officials would travel to China to
discuss reviving stalled trade talks. 
    The latest impact of the protracted trade war was reflected
in the weak manufacturing PMI data from Eurozone, Japan and the
United States earlier in the day, which increased bets for the
European Central Bank to signal interest rate cuts on Thursday. 
    MSCI's index of Latin American stocks and
currencies rose with Brazilian assets
 gaining after the government's latest move to cut worker
protections and boost job creation.
    Brazil's Presidential Chief of Staff Onyx Lorenzoni said
that workers will now be able to withdraw up to 500 reais
($132.00) from their FGTS - a severance fund designed for
employees to prevent firms from firing them.
    The Economy Ministry said the workers' fund will boost its
gross domestic product by 0.35 percentage points over the next
12 months.
    The announcement comes after President Jair Bolsonaro's
government said the fund had made businesses unwilling to hire,
thus increasing unemployment in an already fragile economy.    
    "It's a relatively small-scale package but it's one more
measure that should help in accelerating the process of
stimulating the economy," said Gustavo Rangel, chief economist
for Latin America for ING. 
    Brazil's economy is struggling to emerge from a crippling
recession with Bolsonaro's government focused on passing a key
pension overhaul that is expected to prop up public finances and
kick-start growth.
    The general optimism drove down the cost of insuring
exposure to Brazil's sovereign debt to a five-year low. 
    Among stocks, Brazil's card processor Cielo SA
jumped 12% to the top of the Bovespa after reporting quarterly
results. Its chief executive said the company would be more
competitive if it had its own sources of funding to finance
merchants.
    However, Vale's shares fell over 2% after the
miner was authorized to partially resume dry processing
operations at its Vargem Grande complex, raising concerns about
oversupply of iron ore. 
    Mexican stocks gained higher while the peso
broke a three-day losing streak after data showed consumer
prices rose 0.27% during the first half of July, slightly
beating expectations. 
    Grupo Mexico rose 3% after the mining and
transport firm reported a net profit of $490.9 million for the
second quarter, up 21.9% from the same period last
year.
    Argentina's peso was the prominent loser, down 0.9%
after ratings agencies Moody's said the country's weak economy
and policy uncertainty pose risks. 
    This comes a day after the IMF said it expected a slightly
deeper-than-expected recession in Argentina in 2019 and a slower
recovery in 2020.
    

 Key Latin American stock indexes and currencies at 1955 GMT
    
 MSCI Emerging Markets      1054.87    -0.06
                                     
 MSCI LatAm                 2896.01      0.3
                                     
 Brazil Bovespa           104106.34     0.39
                                     
 Mexico IPC                41165.11     0.56
                                     
 Chile IPSA                 4976.30    -0.43
                                     
 Argentina MerVal          39716.11     1.31
                                     
 Colombia IGBC             12925.61    -0.63
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 3.7672     0.17
                                     
 Mexico peso                19.0662     0.60
                                     
 Chile peso                  690.59     0.07
                                     
 Colombia peso              3198.28    -0.35
                                     
 Peru sol                     3.294     0.03
                                     
 Argentina peso               42.74    -0.85
 (interbank)                         
                                     
 
 (Reporting by Agamoni Ghosh and Sruthi Shankar in Bengaluru
Editing by Chizu Nomiyama and Lisa Shumaker)
  
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