Canada Markets closed

EMERGING MARKETS-Latam stocks scale one-month highs on China-U.S. trade optimism

By Ambar Warrick

(Updates prices, adds context on Mexico, Brazil) By Ambar Warrick Sept 12 (Reuters) - An index of Latin American stocks scaled one-month highs on Thursday, while currencies strengthened as conciliatory trade measures between the United States and China aided risk appetite. U.S. President Donald Trump delayed an increase in tariffs on Chinese goods by two weeks after China exempted some U.S. drugs and other goods from tariffs. The moves underpinned optimism over meaningful headway being made ahead of trade talks scheduled in October. "The goodwill shown by both the U.S. and China lifted the market, a combination of light positioning, cheap valuation and the stability of the Chinese yuan could help emerging markets to recover," Morgan Stanley strategists said in a note. "We think some emerging market high yielders will do well in the near term." The European Central Bank's interest rate cut and outlining of stimulus measures on Thursday also spurred buying on expectations of other major economies resorting to similar measures. Investors will now look to moves from the U.S. Federal Reserve and the Brazilian central bank next week. Speculation over likely interest rate cuts by the Fed has underpinned flows into emerging markets this year. MSCI's Latin American stocks index tacked on about 0.8%, hitting its highest level since Aug. 12, propped up by benchmark-heavy Brazilian shares. The Sao Paulo. index rose 1%, with materials stocks pushing up the index the most. Commodity heavyweight Vale SA rose about 3.6% after iron ore prices rose to a five-week high in anticipation of some restocking demand ahead of a holiday in China. Sources told Reuters that Brazil's development bank was mulling strategies to sell its stakes in Vale and state-run oil and gas heavyweight Petrobras. Chilean stocks rose about 0.3% and were slated for a seventh straight session of gains. The broad optimism helped the Brazilian real gain about 0.3% even as Senate leader Fernando Bezerra said the passage of tax reforms would likely be delayed to 2020, a major roadblock to the government's economic reform drive. The Mexican peso rose about 0.4% to near a one-month high. State-run oil firm Pemex on Thursday offered to prepay about a third of its $14.7 billion bonds maturing between 2020-2023, in President Andres Manuel Lopez Obrador's latest effort to shore up the debt-addled firm. Yields on Mexico's benchmark 10-year bonds were unchanged at 3:04 p.m. EDT (1904 GMT), having dipped earlier in the day. Argentina's peso traded steady after the country announced further control measures requiring anyone buying foreign currency to present a sworn oath promising to wait at least five days before using it to purchase bonds. Latin American stock indexes and currencies at 1926 GMT Stock indexes Daily % change Latest MSCI Emerging Markets 1024.38 0.72 MSCI LatAm 2719.21 0.79 Brazil Bovespa 104483.95 1 Mexico IPC 42696.48 -0.12 Chile IPSA 4973.55 0.33 Argentina MerVal 28918.88 1.052 Colombia IGBC 12926.27 0.34 Currencies Daily % change Latest Brazil real 4.0566 0.18 Mexico peso 19.4185 0.44 Chile peso 709 0.94 Colombia peso 3363 0.33 Peru sol 3.324 0.42 Argentina peso 56.1000 0.14 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Paul Simao)