June 26, 2019 / 2:25 PM / 24 days ago

EMERGING MARKETS-Latam currencies strengthen on U.S-China trade hope

    June 26 (Reuters) - Most Latin American currencies rose on
Wednesday as optimism over U.S.-China trade talks offset
weakness after the U.S. Federal Reserve dampened hopes of
aggressive interest rate cuts.
    U.S. Treasury Secretary Steven Mnuchin said on Wednesday
that the United States and China were close to a trade deal,
CNBC reported ahead of meeting this week between presidents
Donald Trump and Xi Jinping at the G20 Summit.
    The news turned around weakness in Latin American assets
after comments from Fed policymakers on Tuesday pushed investors
to trim expectations of a half-point cut in interest rates in a
policy meeting next month.
    Emerging markets have rallied this month on signals from
major central banks of monetary policy easing in the wake of
global growth slowdown. Investors are now pinning their hopes on
a de-escalation in the U.S.-China trade dispute.
    "While markets are priced for no further escalation in
tariffs in the short-term, a G20 outcome that indicates progress
on key issues and further talks would be positive," Morgan
Stanley strategists wrote in a client note.
    "Whether that de-escalation is ultimately realized later in
the year would be a question for later and the initial market
reaction would be positive, and we'd expect to see a further
rally for EM assets, particularly currencies." 
    The Brazilian real steadied after two days of
declines, with investors focused on the passage of the country's
pension reform bill, which is expected to go through a vote in
the congressional committee as soon as Thursday.
    Presidential spokesman Otavio Rego Barros said on Tuesday
the lower house of Congress would vote on the reform before
lawmakers break for recess on July 18.
    The Mexican peso was on track to snap a three-day run
of declines, while the Colombian and the Chilean
pesos climbed against the dollar.
    The Bovespa stock index climbed about 0.3%, led by
gains for Brazil's largest fuel distribution company BR
Distribuidora. However, bank shares provided the
biggest boost to the main index.

    Latin American stock indexes and currencies at 1403 GMT
    
 Stock indexes                       daily %
                            Latest    change
 MSCI Emerging Markets      1047.19     0.18
                                     
 MSCI LatAm                 2836.85    -0.11
                                     
 Brazil Bovespa           100411.73     0.32
                                     
 Mexico IPC                43829.40     0.09
                                     
 Chile IPSA                       -        -
                                     
 Argentina MerVal                 -        -
                                     
 Colombia IGBC             12674.34     0.18
                                     
                                            
 Currencies                          daily %
                                      change
                             Latest  
 Brazil real                 3.8503     0.02
                                     
 Mexico peso                19.1680     0.27
                                     
 Chile peso                   680.4     0.06
                                     
 Colombia peso               3173.8     0.38
                                     
 Peru sol                         -        -
                                     
 Argentina peso             42.5700    -0.40
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru
Editing by Alistair Bell)
  
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