May 24, 2016 / 4:26 PM / 2 years ago

EMERGING MARKETS-Brazil stocks, currency rise on local politics, austerity measures

By Bruno Federowski
    SAO PAULO, May 24 (Reuters) - Brazil's stocks and currency
rose on Tuesday after a minister accused of seeking to hamper a
corruption probe stepped down, while traders cheered the
announcement of austerity measures by interim President Michel
    Former Planning Minister Romero Juca's resignation on Monday
was seen by traders as a swift response by Temer's center-right
government to its first major scandal, which had helped drive
Brazilian markets lower on Monday. 
    Excerpts from a taped conversation had showed Juca agreed on
the need for a "national pact" to limit the graft investigation,
unleashing outrage two weeks after Temer took charge from
leftist President Dilma Rousseff.
    Also helping brighten the mood was the announcement of
measures including a proposed constitutional amendment that
would automatically limit growth of public spending.
    Some investors remained cautious, however, arguing lawmaker
support is far from guaranteed.
    "There will be lots of bickering," said José Carlos Amado,
an FX trader with Spinelli brokerage in São Paulo. 
    He added that markets will gauge Temer's standing in
Congress later on Tuesday when lawmakers could vote on whether
to allow a 170.5 billion reais ($66.9 billion) primary deficit
this year. 
    Shares of Petróleo Brasileiro SA rose 2 percent,
boosting the benchmark Bovespa stock index. Stocks of
Petrobras, as the state-controlled oil company is known, often
track investors' mood towards the government.
    A drop in shares of state-controlled lender Banco do Brasil
SA, however, limited gains for the benchmark index.
    Temer said he would consider closing a sovereign wealth fund
which owns about 2 billion reais ($563 million) in Banco do
Brasil equity, possibly selling the stock in financial markets
to gather funds.
    The Brazilian real strengthened 0.8 percent,
outperforming its peers in Latin America. Currencies such as the
Mexican  and Chilean pesos rose as an
increase in commodity prices boosted the appetite for assets
from exporters of basic products.

    Key Latin American stock indexes and currencies at 1605 GMT:
 Stock indexes                                daily %   YTD %
                                               change  change
 MSCI Emerging Markets                788.66    -0.03   -0.66
 MSCI LatAm                          2073.39     0.51   12.73
 Brazil Bovespa                     49440.06     0.22   14.05
 Mexico IPC                         45377.08     0.31    5.58
 Chile IPSA                          3948.88    -0.01    7.30
 Chile IGPA                         19481.82     0.17    7.33
 Argentina MerVal                   12539.78     0.52    7.41
 Colombia IGBC                       9784.61     -0.4   14.48
 Venezuela IBC                      15236.19    -0.22    4.44
 Currencies                                   daily %   YTD %
                                               change  change
 Brazil real                          3.5502     0.85   11.18
 Mexico peso                         18.4540     0.35   -6.63
 Chile peso                              693     0.17    2.41
 Colombia peso                       3058.39     0.06    3.63
 Peru sol                              3.336     0.24    2.34
 Argentina peso (interbank)          14.0250    -0.18   -7.43
 Argentina peso (parallel)             14.59     0.55   -2.19

 (Reporting by Bruno Federowski; Additional reporting by Paula
Arend Laier; Editing by Chris Reese)
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