July 24, 2017 / 9:09 PM / a year ago

EMERGING MARKETS-Mexico stocks hit high, Brazil yields dip on rate cut bets

 (Adds analysts comment, details on Mexican stocks, updates
    By Sheky Espejo
    MEXICO CITY, July 24 (Reuters) - Mexican stocks rose to a
record high, backed by forecasts for strong earnings reports
this week, while yields on Brazilian interest rate futures
dipped on bets the central bank will cut rates aggressively this
    Mexico's S&P/BMV IPC stock index ticked up to a new
all-time high. "There are chances for even more record highs due
to the expectation of good earnings reports this week," said
James Salazar, a strategist at CI Banco.
    Shares of Wal-Mart de Mexico and mining, rail
and infrastructure company Grupo Mexico both rose
less than 1 percent ahead of their second quarter earnings
reports this week. 
    But shares of Coca-Cola Femsa, the world's largest
Coke bottler, fell more than 5 percent after the company said it
was poised to lose a key distribution contract in Brazil. 

    In Brazil, yields on short-term interest rate futures
 fell as the market tilted toward bets for a 100 basis
point cut on Wednesday by the country's central bank.
    In its last decision, Brazil's central bank said it could
slow the pace of cuts from 100 basis points per meeting due to
growing political turmoil, driving many investors to bet on a
smaller 75 basis-point reduction in July.
    Those bets lost steam after Congress approved a revamp of
the country's labor laws by a wide margin, suggesting resilient
lawmaker support for President Michel Temer's reform platform
despite corruption allegations against him.
    Analysts and traders said the future path of interest rates
will hinge on the approval of other reforms needed to curb
growth of public debt.
    "It is yet to be seen how the central bank will approach the
pension reform paralysis," CM Capital Markets economist Camila
Abdelmalack said, referring to successive delays to Temer's
plans to streamline the country's social security system.
    Reforms are also key to extend the Brazilian real's rally as
it looks set to post the biggest gain among Latin American
currencies this month, traders said.
    The currency seesawed on Monday, hovering near 3.15
reais to the greenback. In a Monday note to clients, strategists
at BNP Paribas recommended clients purchase the real, betting
that it will breach the 3.00 threshold by the end of the year.
    Latin American stock indexes and currencies at 20:01 GMT:

 Stock indexes                                 daily %     YTD %
                                      Latest    change    change
 MSCI Emerging Markets               1,064.01    +0.36    +22.95
 MSCI LatAm                          2,734.43    -0.15    +17.00
 Brazil Bovespa                     65,068.65    +0.59     +8.04
 Mexico S&P/BVM IPC                 51,664.48    +0.19    +13.19
 Chile IPSA                          5,025.56    +0.31    +21.06
 Chile IGPA                         25,100.50    +0.29    +21.06
 Argentina MerVal                   21,267.65    -1.07    +25.71
 Colombia IGBC                      10,930.44    +0.34     +7.92
 Venezuela IBC                     132,529.27    +0.92   +318.00
 Currencies                                    daily %     YTD %
                                                change    change
 Brazil real                            3.147    -0.22     +3.25
 Mexico peso                           17.702    -0.25    +17.18
 Chile peso                           651.400    +0.02     +2.96
 Colombia peso                      3,030.110    -0.56     -0.94
 Peru sol                               3.246    +0.09     +5.18
 Argentina peso (interbank)            17.425    +0.09     -8.90
 Argentina peso (parallel)             18.000    -0.22     -6.56

 (Additional reporting by Bruno Federowski and Claudia Violante
in Sao Paulo; Editing by Tom Brown and Cynthia Osterman)
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