June 23, 2020 / 8:04 PM / 23 days ago

EMERGING MARKETS-Latam FX, stocks join global rally on economic recovery hopes

    * Brazil's real up 2.4%; cenbank sees less scope for rate
cuts
    * Upbeat PMIs from Europe, U.S. fuel hopes for economic
recovery
    * MSCI's latam stocks index up 1.5%
    * Foreign flows to Latam risks "drying out"- Colombian
ex-finmin 

 (Updates prices)
    By Susan Mathew
    June 23 (Reuters) - Latin American stocks and currencies
rose on Tuesday as upbeat data from Europe and the United States
raised hopes of an economic recovery, with Brazil's real jumping
2.4% after its central bank saw little scope to cut interest
rates much further. 
    The real extended gains to a third session after
minutes of the central bank's last meeting showed monetary
policy committee members urged caution in easing rates. The real
had underperformed last week after the central bank cut its key
interest rates further into record low territory. 
    Also aiding sentiment in Brazil were new measures to help
mitigate economic damage from the coronavirus pandemic,
including a credit program for small firms that could total 55.8
billion reais ($10.85 billion), and $3 billion in emergency aid
for power companies.
    Other regional currencies traded flat to higher against a
weaker dollar, with Colombia's peso touching a near
two-week high.
    MSCI's index of Latam stocks, meanwhile,
rose 1.5%, with main stock indexes in Brazil and Mexico
 up 0.6% and 0.4% respectively. 
    The moves were in line with global markets that cheered
confirmation that the U.S.-China trade pact was "fully intact",
after earlier confusing statements from the White House.
Investors also took heart from a slowing pace of contraction in
PMIs in Europe and United States. 
    But foreign investment in Latam risks "drying out" due to
economic turmoil and fiscal instability sparked by the pandemic,
especially if Chinese-led commodity demand remains weak,
Mauricio Cardenas, a former Colombian finance minister, said in
an interview with the Reuters Global Markets Forum on Tuesday.

    Regional markets have been hit by selling pressure recently
amid the surging number of COVID-19 cases in Latin America. The
MSCI's index of Latin American currencies is
down 17% this year, while its currency counterpart is down about
32%, despite double digit percentage recoveries since year-lows.
    More bleak growth forecasts continued to pour in for South
American countries, as Chile's Budget Office said on Monday the
economy would shrink 6.5% in 2020, a far deeper contraction than
predicted just two months ago.
    For Colombia, the release of the Medium Term Fiscal
Framework next week will be key in determining if the country
can preserve its investment grade status, Cardenas said, against
the backdrop of its decision to suspend deficit limits until
2022. 
    
    Key Latin American stock indexes and currencies at 1948 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1014.74     1.45
                                   
 MSCI LatAm               1981.66     1.48
                                   
 Brazil Bovespa          95895.26     0.59
                                   
 Mexico IPC              38271.63     0.39
                                   
 Chile IPSA               4024.26     0.64
                                   
 Argentina MerVal        40959.94    1.526
                                   
 Colombia COLCAP          1144.51    -1.46
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.1475     2.40
                                   
 Mexico peso              22.4160     0.31
                                   
 Chile peso                 818.3    -0.22
                                   
 Colombia peso            3698.25     0.75
                                   
 Peru sol                  3.5217    -0.47
                                   
 Argentina peso           70.0300    -0.07
 (interbank)                       
                                   
 
 (Additional reporting by Aaron Saldanha and Lisa Pauline
Mattackal in Bengaluru;
Editing by Sonya Hepinstall)
  
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