September 9, 2019 / 8:12 PM / 3 months ago

EMERGING MARKETS-Latam stocks, FX pause as key central bank meetings loom

 (Updates prices, changes analysts' quote)
    By Sruthi Shankar
    Sept 9 (Reuters) - Latin American stocks held near
three-week highs on Monday, and a rally in the region's
currencies halted as investors stayed on the sidelines ahead of
monetary policy decisions from major central banks that could
set the tone for risky assets.
    The MSCI's index of Latin American currencies
 dropped 0.6% after closing out its biggest
weekly gain since February on Friday, helped by signs of further
stimulus for China's slowing economy and firming U.S. interest
rate cut expectations.
    Brazil's real eased from two-week highs hit last week
to drop 0.9%, while currencies of Mexico, Chile
and Colombia fell between 0.2% and 0.5%.
    Investors are looking ahead to the European Central Bank's
meeting on Thursday, where the central bank is expected to
introduce a fresh round of stimulus to prop up an ailing euro
zone economy.
    In Mexico, consumer price inflation slowed more than
expected in August to near a three-year low, government data
showed, giving room for its central bank to lower rates further.

    Mexico's government cautiously freed up funds for spending
in its 2020 budget proposal on Sunday, with a primary fiscal
surplus of 0.7% of gross domestic product targeted in the budget
for next year - below earlier targets.
    "A weakening global growth outlook will affect LatAm FX via
a deterioration of the terms of trade," Societe Generale's
Bertrand Delgado said in a note.
    "In the upcoming weeks, however, LatAm FX might recover some
recent loses as valuations look cheap and the USD might lose
some support as the Fed is expected to lower rates at the
September meeting," he said.
    Markets in the resource-rich Latin American economies had
taken a beating in August as the United States and China
escalated their trade dispute with additional tariffs on each
other's goods, with growth dwindling in both Brazil and Mexico.
    Chile's peso took a hit on Monday as copper prices slipped
on weak China export data, hurting the currency of the world's
largest producer of the red metal. 
    The Argentine peso remained steady after last week's
imposition of capital controls helped arrest a sharp plunge in
the peso, hit by business-friendly President Mauricio Macri's
poor performance at the presidential primaries last month. 
    Polls are predicting a huge win for populist-leaning Alberto
Fernandez, who won by a far larger-than-expected margin in
August, dashing Macri's hopes of being re-elected at the end of
the year. 
    Sao Paulo-listed stocks were flat, as gains in
material shares, including those in miner Vale,
offset losses in consumer companies such as meatpacker JBS SA
 and electronics and appliance retailer Magazine Luiza
    Shares of meatpackers Minerva and Marfrig
 jumped between 3.8% and 5% after Brazil's agriculture
ministry said China authorized some Brazilian meat processing
facilities to export to the Asian country.

 Latin American stock indexes and currencies at 1940 GMT:
        Stock indexes                  Latest       Daily %
 MSCI Emerging Markets                    1009.93         0.2
 MSCI LatAm                               2664.96       -0.59
 Brazil Bovespa                         102971.07        0.03
 Mexico IPC                              42700.22       -0.02
 Chile IPSA                               4860.63        0.77
 Argentina MerVal                        27066.97      -2.143
 Colombia IGBC                           12745.02         0.3
           Currencies                  Latest       Daily %
 Brazil real                               4.0983       -0.91
 Mexico peso                              19.5740       -0.23
 Chile peso                                 714.5       -0.48
 Colombia peso                             3368.7       -0.52
 Peru sol                                   3.349       -0.21
 Argentina peso (interbank)               56.0000       -0.32

 (Reporting by Sruthi Shankar in Bengaluru; editing by Jonathan
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