June 3, 2020 / 2:12 PM / a month ago

EMERGING MARKETS-Brazil's real on a tear amid bleak outlook

    By Susan Mathew
    June 3 (Reuters) - Brazil's real surged 2.6% on Wednesday
after industrial output in the country fell less than expected,
while other Latin American currencies joined a rally in risk
assets on hopes of a strong economic recovery from a
pandemic-induced recession.
    Industrial production in Brazil fell 18.8% in April at its
fastest pace on record due to coronavirus containment measures,
but the drop was less than the estimated 29.2% slide.
 
    "It still highlights that GDP will fall dramatically in Q2 –
perhaps by 10-12% quarter on quarter," warned William Jackson,
chief emerging markets economist at Capital Economics.
    "It will also provide (the monetary policy committee) with
plenty of reason to cut interest rates further later this
month."
    The real extended gains after firming 3% on Tuesday.
The currency has been one of the most worst performing emerging
market currencies this year, but a recent bout of risk appetite
has lifted the real from record lows, even as pandemic and
political woes persist.
    Hopes of an economic recovery gained momentum as service
sector PMIs from some countries showed improvement as economies
restarted more businesses after a pandemic induced stall, while
the U.S. labor market appeared to stabilize as private payrolls
fall less than expected.
    Sao Paulo listed stocks extended gains to a fourth
session with beaten down airline stocks Azul and Gol
 among the top gainers. 
    Most other Latam stocks also rose, tracking Wall Street
higher, while currencies made strong gains against a weaker
dollar. 
    Chile's peso hit an over 4-month high as copper
prices rallied, while Mexico's peso rose for a fifth
straight session.     
    Argentina's debt restructuring saga continued. A prominent
group of the countries creditors said its restructuring proposal
was in line with an International Monetary Fund assessment of
what would be sustainable, and called for a deal to help the
country avoid a costly default. 
    
    Key Latin American stock indexes and currencies at 1355 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     985.00     1.81
                                   
 MSCI LatAm               1973.58     3.77
                                   
 Brazil Bovespa          93135.06     2.29
                                   
 Mexico IPC              37869.88     1.09
                                   
 Chile IPSA               3797.17     1.25
                                   
 Argentina MerVal               -        -
                                   
 Colombia COLCAP          1125.66     0.71
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.0767     2.60
                                   
 Mexico peso              21.5760     0.95
                                   
 Chile peso                 766.5     1.79
                                   
 Colombia peso            3574.14     1.51
                                   
 Peru sol                  3.3768     0.53
                                   
 Argentina peso           68.8000    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell)
  
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