EMERGING MARKETS-Brazil stocks stretch rally on China, U.S. outlook
By Asher Levine SAO PAULO, March 31 (Reuters) - Brazilian stocks looked set to record their biggest monthly rise in more than two years on Monday as optimism over Chinese economic stimulus and comments from U.S. Federal Reserve chief Janet Yellen helped the Bovespa index extend a recent rally. The broader MSCI Latin American stock index touched its highest level this year, while most currencies across the region posted only slight moves against the dollar. China's government signaled on Friday it would take steps to support its cooling economy, helping boost shares of mining company Vale SA, which counts China as its top customer. "Today the stock is rising considerably on the expectations that China could come out with growth stimulus, and because iron-ore prices rose," said Fabio Goncalves, a trader at Banrisul Corretora in the southern city of Porto Alegre. Stocks were further boosted by signals from the Fed's Yellen, who said in a speech on Monday that an "extraordinary commitment" was still needed to support the U.S. economy. Local shares tend to rise on the outlook for continued monetary stimulus in the United States, which helps boost global liquidity and often supports demand for riskier assets. Monday's rise in the Bovespa was the 10th in 11 days, with the index on track to close above 50,000 points for the first time in nearly three months. "The market had fallen quite far because local pension funds were selling off equities in favor of bonds," said Pablo Stipanicic Spyer, a director at Mirae Asset Securities in Sao Paulo. "We then saw foreign investors start to come back in a case of 'buying the dips' with much of that money likely coming out of Russian assets." Spyer's comments were echoed by analysts at the annual meeting of the Inter-American Development Bank this weekend, who suggested Latin American economies would continue to receive short-term capital flows from investors fleeing Russia due to fear of geopolitical instability. Recent gains in the Bovespa may be limited, however, as a technical indicator known as the relative strength index showed Brazilian shares crossing into "overbought" territory for the first time since Sept. 2013. Elsewhere in Latin America, Mexico's IPC stock index rallied for a third session to touch its highest level since mid-February, while Chile's IPSA stock index edged higher. Currency markets fluctuated, though swings were modest. Brazil's real erased early losses to strengthen slightly against the dollar following Yellen's comments. "Yellen said some things that were more 'dovish,' and that took a bit of pressure off the market in relation to (expectations for) higher interest rater in the United States," said Waldir Kiel, an economist at H.Commcor in Sao Paulo. The Mexican and Chilean pesos also tracked slightly higher following Yellen's speech. Gains in Chile's currency were limited by a drop in prices for copper, the country's main export, and data on Monday that showed industrial output fell more than expected in February. Key Latin American stock indexes and currencies at 1647 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 993.46 0.87 -1.77 MSCI LatAm 3181.08 0.9 -1.5 Brazil Bovespa 50172.16 0.81 -2.59 Mexico IPC 40422 0.93 -5.39 Chile IPSA 3769.29 0.25 1.90 Chile IGPA 18542.39 0.25 1.73 Argentina MerVal 6313.46 1.85 17.11 Colombia IGBC 13718.01 0.31 4.95 Peru IGRA 14270.86 -0.02 -9.41 Venezuela IBC 2523.11 0.06 -7.80 Currencies daily % YTD % change change Latest Brazil real 2.2541 0.19 4.56 Mexico peso 13.058 0.09 -0.21 Chile peso 549.4 0.11 -4.24 Colombia peso 1969.7 -0.24 -1.91 Peru sol 2.808 0.00 -0.53 Argentina peso (interbank) 8.0050 -0.03 -18.89 Argentina peso (parallel) 10.8 0.56 -7.41 (Additional reporting by Priscila Jordao and Bruno Federowski; Editing by Peter Galloway)
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