July 1, 2019 / 8:20 PM / 3 months ago

EMERGING MARKETS-Latam stocks, FX rally on U.S.-China trade reprieve

 (Updates prices)
    By Susan Mathew
    July 1 (Reuters) - Most Latin American currencies and stocks
made a positive start to the second half of the year on Monday
as the United States and China agreed to revive trade
negotiations after a long lull, spurring investment into riskier
assets.
    U.S. President Donald Trump offered concessions to China on
Saturday when he met Chinese President Xi Jinping at the G20
summit, including holding off on new tariffs and easing
restrictions on tech company Huawei. China agreed to make
unspecified new purchases of U.S. farm products and restart
negotiations.
    Most regional stocks rose in line with world stocks, and
currencies firmed against a significantly stronger dollar, but
ended off session highs.
    Mexican assets led gains, with the peso - a weather
vane for trade sentiment, up 0.5%, while its IPC stock index
 climbed 0.7%. Investors seemed to brush-off data showing
Mexican manufacturing slipped to a 20-month low in June.

    "The G20 result was mostly as expected, but the partial
re-start of exports to Huawei was a positive surprise,"
Citigroup analysts wrote in a note. 
    "This should benefit EMFX, but it is unlikely to be a game
changer for the trade dynamics."
    Fears that a drawn-out trade dispute between the United
States and China will hit global growth have spurred bouts of
selling this year, with MSCI's index of emerging market stocks
and currencies posting their worst monthly performance this year
in May.
    But hopes that major central banks would tilt toward
monetary policy easing to stir growth, and signs of progress in
Sino-U.S. trade relations have helped them recover since.
    Brazil's real firmed 0.1% on Monday, while Sao
Paulo-traded stocks rose 0.5%.
    Data on Monday showed manufacturing in Brazil avoided
slipping into contraction in June.
    The Argentine peso was boosted by the central bank's
move to set a new lower interest rate floor on its benchmark
"Leliq" notes at 58% for July.
    The weekend also saw the European Union and South American
bloc Mercosur, which Argentina and Brazil are part of, agreeing
to a free trade treaty and committing to more open markets.

    If ratified, Credit Suisse analysts said the treaty would be
a boost for Argentina's trade and investment prospects over the
medium term. 
    "With this deal, Argentina would be committed to improving
some legal and regulatory standards. It could also make it more
difficult for future governments to implement punitive trade
measures," the Credit Suisse analysts said in a note.
    Chile's currency and stocks, however,
slipped, hurt by the price of copper - Chile's main export,
ending lower.
    Markets in Colombia were closed for a holiday. 
    
    Latin American stock indexes and currencies at 1957 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1062.48      0.72
                                        
 MSCI LatAm                    2852.15       0.3
                                        
 Brazil Bovespa              101458.14      0.49
                                        
 Mexico IPC                   43456.62      0.68
                                        
 Chile IPSA                    5064.69     -0.12
                                        
 Argentina MerVal             41497.73     -0.71
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.8437     -0.12
                                        
 Mexico peso                   19.1230      0.49
                                        
 Chile peso                     680.02     -0.53
                                        
 Peru sol                        3.289      0.15
                                        
 Argentina peso                42.3500      0.38
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew in Bengaluru; editing by Grant
McCool)
  
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