September 5, 2019 / 8:06 PM / a year ago

EMERGING MARKETS-Latam stocks hit 3-week highs on U.S-China trade optimism

 (Updates with market close)
    By Sruthi Shankar
    Sept 5 (Reuters) - Latin American stocks surged to
three-week highs on Thursday after the United States and China
agreed to resume trade talks, raising expectations that both
sides will resolve a tariff dispute that has hurt global growth.
    MSCI's index of Latin American stocks rose
1.6%, tracking gains in global stock markets after the world's
two largest economies agreed to hold high-level talks in early
    Brazil's Bovespa index jumped 1.2%, boosted by gains
in banking shares as central bank President Roberto Campos Neto
said the economy should recover in the second half of year, most
likely in the fourth quarter.
    Campos Neto also said inflation in Brazil is well-anchored
over the short-, medium- and long-term horizons, giving
policymakers room to reduce interest rates further.
    Latin American currencies that have been battered by the
U.S.-China trade war largely steadied against the dollar.
    The real edged slightly lower after two straight days
of gains. The currency, down 5.3% for the year, is among the
worst-performing emerging currencies after the Argentine peso's
 32% slump, and the Turkish lira's 7% fall.
    Brazil's Senate constitutional affairs committee on
Wednesday approved a bill that would overhaul the social
security system and save the federal government about 1 trillion
reais ($243 billion) over the next decade.
    "The currency has deviated from equilibrium levels, in our
view. We therefore project appreciation in the coming months as
reforms advance in Congress and GDP growth accelerates," Ronaldo
Patah and Alejo Czerwonko, strategists at UBS Global Wealth
Management, wrote in a note.
    The Argentine peso edged slightly lower but traded
near 56 per dollar, supported by capital controls imposed by the
government of Latin America's third-largest economy earlier this
week. It previously announced plans to "re-profile" some $100
billion in debt.
    The peso has been battered since President Mauricio Macri
suffered a thumping defeat in primaries at the hands of Alberto
    Some of Argentina's largest creditors, who met informally
this week, according to a Financial Times report, are said to
have concluded that negotiations with Macri's government would
be futile if Fernandez ultimately comes to power in October.
    "Any deal could be torn up by the new government, so that
suggests that we're in a period of limbo until the new
government comes into power,” said Edward Glossop, Latin America
economist at Capital Economics. 
    Chile's peso rose 1%, leading gains among the
regional currencies after a jump in the price of copper, the
country's top export. The rebound comes after the currency's
drop to its lowest level since January 2016 on Tuesday after the
central bank slashed interest rates by 50 basis points to the
lowest in 9 years.

  Latin American stock indexes and currencies at 1937 GMT:
        Stock indexes                  Latest       Daily %
 MSCI Emerging Markets                    1002.76        1.23
 MSCI LatAm                               2651.77        1.57
 Brazil Bovespa                         102407.01        1.19
 Mexico IPC                              42712.01        0.92
 Chile IPSA                               4817.31        1.26
 Argentina MerVal                        26615.88       7.911
 Colombia IGBC                           12712.67        0.21
           Currencies                  Latest       Daily %
 Brazil real                               4.1000       -0.17
 Mexico peso                              19.7016        0.06
 Chile peso                                 714.8        1.08
 Colombia peso                             3374.5        0.55
 Peru sol                                   3.364        0.42
 Argentina peso                           56.0000       -0.56
 (Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru;
Editing by Dan Grebler)
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