May 15, 2020 / 2:42 PM / 10 days ago

EMERGING MARKETS-Oil prices lift Mexican, Colombian pesos but sentiment remains fragile

    By Susan Mathew
    May 15 (Reuters) - Surging oil prices buoyed currencies of
oil exporters Mexico and Colombia on Friday, although rising
U.S.-China trade tensions and dismal economic data owing to the
coronavirus outbreak kept sentiment at bay.
    Extending gains to a their straight session, the Mexican
peso rose 0.3%, while Colombia's currency firmed
0.5% as crude prices touched a 1-1/2-month high on
signs demand was picking up, with China reporting increased
refinery runs.
    Rising iron ore and copper prices also helped gains in
commodity rich Latam.  
    But on the coronavirus front, Mexico and Brazil recorded a
record rise in the number of new cases on Thursday, as
presidents of both countries pushed for lifting of lockdowns to
restart economic activity.
    Data on Friday showed economic activity in Brazil fell at
its fastest pace on record in March. The real currency,
however, erased early losses to rise 0.9%.
    In Mexico, after some confusion regarding the date, the auto
and mining industries, deemed essential, have been green lit to
restart on Monday.   
    On Thursday, Mexico's central bank cut rates as expected by
50 basis points to 5.5% and signaled more may be in the offing.

     "(The bank's statement) tells us that growth remains the
key focus of policy, and while further depreciation in MXN
continues to pose an upside risk to inflation, it will not
dominate the policy discussion," wrote Sacha Tihanyi, deputy
head of emerging markets strategy at TD Securities. 
    The firm expects 50 basis point cuts at the next three
meetings, followed by two more 25 bps cuts to leave the policy
rate on hold at 3.5% by year end.
    Denting broader sentiment, Washington moved to block
shipments of semiconductors from global chipmakers to China's
Huawei Technologies. This comes a day after U.S. President
Donald Trump said he could go so far as to cut ties with China.

    Meanwhile, data from the two nations showed retail sales
fell more than expected in April, reinforcing the economic
damage from the pandemic.
    Among notable movers in stocks, Brazilian meat processor JBS
 weighed the most on the Bovespa after saying
it faces 'enormous volatility' amid the pandemic, while pulp and
aper company Suzano slipped after reporting a wider
than expected quarterly loss.
    Oil prices kept Petrobras shares afloat, but the
firm took a 65.3 billion real ($11.2 billion) impairment on its
exploration and production assets on Thursday, leading to a
quarterly net loss.
    Brazil's government on Thursday said it is considering 12
billion reais ($2.06 billion) in emergency loans to help power,
Reuters reported.
    CPFL Energia, Energisa SA rose more
than 1%, while Equatorial Energia, Eletrobras
 and state-owned Cemig fell between 0.1%
and 1.3%.
    
    Key Latin American stock indexes and currencies at 1413 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     902.29     0.16
                                   
 MSCI LatAm               1578.48     2.23
                                   
 Brazil Bovespa          79270.89     0.33
                                   
 Mexico IPC              36014.73    -0.22
                                   
 Chile IPSA               3667.54     0.71
                                   
 Argentina MerVal               -        -
                                   
 Colombia COLCAP          1054.48     0.21
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.7655     0.91
                                   
 Mexico peso              23.7979     0.26
                                   
 Chile peso                   821     0.01
                                   
 Colombia peso            3925.17     0.47
                                   
 Peru sol                  3.4388     0.26
                                   
 Argentina peso           67.7200    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Marguerita Choy)
  
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