April 29, 2020 / 2:35 PM / a month ago

EMERGING MARKETS-Latam stocks at two-week high, FX gains as lifting of lockdowns eyed

    * Brazil's real leads gains in FX
    * MSCI's Latam stocks index at highest since April 14
    * Mexican, Colombian pesos rise tracking oil

    By Ambar Warrick
    April 29 (Reuters) - Latin American stocks hit a two-week
high on Wednesday amid talks of reopening major economies from
coronavirus-related lockdowns, while strength on Wall Street
also spilled over.
    Buying into risky assets was somewhat boosted by several
parts of the United States and Europe mulling over possible
exits from restrictions on business and social activity, as the
rate of new infections slowed. 
    The MSCI's index of Latin American stocks
rose 4.8%, touching its highest level since April 14. Bourses in
Brazil, Chile and Mexico all rose more
than 1%.
    Markets in Brazil, Latin America's largest economy, were
cheered by Economy Minister Paulo Guedes flagging more aid for
virus-stricken states, while also suggesting that interest rates
in the country could fall further into record-low territory.

    Wall Street indexes gained after an encouraging update on a
potential drug to treat COVID-19, along with some strong
first-quarter earnings.
    Latin American currencies also rose as the increased risk
appetite pressured the dollar. Markets were also awaiting the
results of a U.S. Federal Reserve meeting later in the day for
more cues on how the central bank would navigate the outbreak.
    Brazil's real led gains among its peers,
recovering sharply from record-low levels hit last week. 
    The Mexican and Colombian pesos rose 0.8% and
1%, respectively, tracking a mild recovery in oil prices as the
prospect of major economies reopening fed expectations of
demand. 
    Still, a worse than expected contraction in the U.S. GDP -
which fell 4.8% in the first quarter - weighed on sentiment,
given that the figure only partially reflected the impact of a
virus-related lockdown.
    The second quarter reading is expected to show the full
economic impact of the lockdown, with ING economists forecasting
a 40% contraction at an annualized rate. 
    "Governments across the world are faced with a catch-22
dilemma: easing social distancing and stay-at-home restrictions
too early could trigger a second wave of the pandemic, but
maintaining various restraints for too long may cause permanent
damage to the economy that could lead to a depression," Rabobank
analysts wrote in a note.
    Emerging market economies are expected to face even greater
difficulties than their developed peers from the virus, given
that the window for them to lock down economic activity is much
smaller due to their heavy reliance on global trade.
    Investors are also concerned about countries maintaining
their foreign exchange reserves in the face of constraints on
movements across borders.   

    Key Latin American stock indexes and currencies at 1422 GMT
    
 MSCI Emerging Markets          918.76                1.78
                                        
 MSCI LatAm                    1698.64                4.69
                                        
 Brazil Bovespa               82632.97                1.62
                                        
 Mexico IPC                   36589.87                2.12
                                        
 Chile IPSA                    3983.08                2.11
                                        
 Argentina MerVal             33828.28               2.309
                                        
 Colombia COLCAP               1161.83                1.44
                                        
                                                          
       Currencies             Latest      Daily % change
 Brazil real                    5.3833                2.46
                                        
 Mexico peso                   24.0620                0.87
                                        
 Chile peso                      836.3                1.06
                                        
 Colombia peso                 3985.09                1.09
 Peru sol                       3.3637                0.69
                                        
 Argentina peso                66.7400               -0.15
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; editing by Jonathan
Oatis)
  
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