January 16, 2020 / 8:11 PM / a month ago

EMERGING MARKETS-Mexican shares join global rally; Brazil's real gives up gains

    * Investors cautious about lasting U.S.-China trade truce
    * Brazil's real gives up gains on rising rate cut
expectations 
    * U.S. senate passes USMCA; Mexican shares touch one month
peak

    By Susan Mathew
    Jan 16 (Reuters) - Latin American currencies traded flat to
lower on Thursday with Brazil's real giving up gains made on
upbeat economic data, while Mexican shares touched a one-month
high in line with a rally in global markets. 
    Global markets cheered the signing of a much-awaited Phase 1
trade deal between the United States and China on Wednesday,
but, as focus turns to the second phase of negotiations,
analysts warn against exuberance as China's target of $200
billion in additional purchases appears daunting. 
    "It's a bit of a warning sign, where we're not escalating
anymore, but things aren't exactly improving," said Win Thin,
head of emerging market currency strategy at Brown Brothers
Harriman.
    "It's positive for EMs, but I think we've gotten a lot of
big moves in EM already and further gains will be tough going
forward," he said.
    Brazil's real had firmed as much as 0.4% earlier in
the session, but later wiped away those gains.
    Data on Thursday showed Brazilian economic activity rose in
November. But analysts warn that a recent spate of weak economic
indicators could set the stage for another interest rate cut at
the next central bank meeting in February after four consecutive
reductions in 2019 that took rates to record lows. 
    An economy ministry summary of private-sector forecasts on
Thursday, however, showed the Brazilian government's fiscal
outlook for this year and next continues to improve.
 
    Analysts at UBS also held a positive outlook for Brazil:
economic recovery driving superior earnings growth, continued
reform momentum driving a valuation premium to EM peers, and
record-low real rates supporting domestic and international
funds' allocation to equities, could see Brazil equities
outperform EM equities over the next six to 12 months, they
said.
    In Mexico, the peso traded flat, while stocks
scaled a one-month high, up 1.3%, after two sessions of losses.
    The U.S. Senate on Thursday approved a revamp of the
26-year-old North American Free Trade Agreement, or NAFTA. The
deal is still pending approval in Canada still before it can
take effect, but little resistance is expected.
    Argentina's peso was also muted, as data showed
consumer prices rose 53.8% in 2019, marking the biggest increase
in 28 years and posing a major challenge for the new president,
but the number was below a consensus estimate.    
    
    Key Latin American stock indexes and currencies at 1941 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1139.20      0.11
                                        
 MSCI LatAm                    2867.82      -0.1
                                        
 Brazil Bovespa              116122.88     -0.25
                                        
 Mexico IPC                   45020.50      1.28
                                        
 Chile IPSA                    4893.52       0.2
                                        
 Argentina MerVal             42149.26     2.189
                                        
 Colombia COLCAP               1646.12     -0.16
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    4.1908     -0.17
                                        
 Mexico peso                   18.7927     -0.05
                                        
 Chile peso                      775.5     -0.04
                                        
 Colombia peso                 3320.85     -0.75
 Peru sol                        3.322      0.03
                                        
 Argentina peso                59.9750     -0.03
 (interbank)                            
                                        
 
 (Reporting by Sagarika Jaisinghani and Ambar Warrick in
Bengaluru; editing by Jonathan Oatis)
  
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