March 31, 2014 / 5:16 PM / in 4 years

EMERGING MARKETS-Brazil stocks stretch rally on China, U.S. outlook

By Asher Levine
    SAO PAULO, March 31 (Reuters) - Brazilian stocks looked set
to record their biggest monthly rise in more than two years on
Monday as optimism over Chinese economic stimulus and comments
from U.S. Federal Reserve chief Janet Yellen helped the Bovespa
index extend a recent rally.
    The broader MSCI Latin American stock index 
touched its highest level this year, while most currencies
across the region posted only slight moves against the dollar. 
    China's government signaled on Friday it would take steps to
support its cooling economy, helping boost shares of mining
company Vale SA, which counts China as its top
    "Today the stock is rising considerably on the expectations
that China could come out with growth stimulus, and because
iron-ore prices rose," said Fabio Goncalves, a trader at
Banrisul Corretora in the southern city of Porto Alegre.
    Stocks were further boosted by signals from the Fed's
Yellen, who said in a speech on Monday that an "extraordinary
commitment" was still needed to support the U.S. economy.
    Local shares tend to rise on the outlook for continued
monetary stimulus in the United States, which helps boost global
liquidity and often supports demand for riskier assets.
    Monday's rise in the Bovespa was the 10th in 11
days, with the index on track to close above 50,000 points for
the first time in nearly three months.
    "The market had fallen quite far because local pension funds
were selling off equities in favor of bonds," said Pablo
Stipanicic Spyer, a director at Mirae Asset Securities in Sao
Paulo. "We then saw foreign investors start to come back in a
case of 'buying the dips' with much of that money likely coming
out of Russian assets."
    Spyer's comments were echoed by analysts at the annual
meeting of the Inter-American Development Bank this weekend, who
suggested Latin American economies would continue to receive
short-term capital flows from investors fleeing Russia due to
fear of geopolitical instability. 
    Recent gains in the Bovespa may be limited, however, as a
technical indicator known as the relative strength index showed
Brazilian shares crossing into "overbought" territory for the
first time since Sept. 2013. 

    Elsewhere in Latin America, Mexico's IPC stock index 
rallied for a third session to touch its highest level since
mid-February, while Chile's IPSA stock index edged
    Currency markets fluctuated, though swings were modest.
    Brazil's real erased early losses to strengthen
slightly against the dollar following Yellen's comments.
    "Yellen said some things that were more 'dovish,' and that
took a bit of pressure off the market in relation to
(expectations for) higher interest rater in the United States,"
said Waldir Kiel, an economist at H.Commcor in Sao Paulo.
    The Mexican and Chilean pesos  also tracked
slightly higher following Yellen's speech.
    Gains in Chile's currency were limited by a drop in prices
for copper, the country's main export, and data on
Monday that showed industrial output fell more than expected in
    Key Latin American stock indexes and currencies at 1647 GMT:
 Stock indexes                             daily %     YTD %
                               Latest       change    change
 MSCI Emerging Markets            993.46      0.87     -1.77
 MSCI LatAm                      3181.08       0.9      -1.5
 Brazil Bovespa                 50172.16      0.81     -2.59
 Mexico IPC                        40422      0.93     -5.39
 Chile IPSA                      3769.29      0.25      1.90
 Chile IGPA                     18542.39      0.25      1.73
 Argentina MerVal                6313.46      1.85     17.11
 Colombia IGBC                  13718.01      0.31      4.95
 Peru IGRA                      14270.86     -0.02     -9.41
 Venezuela IBC                   2523.11      0.06     -7.80
 Currencies                                daily %     YTD %
                                            change    change
 Brazil real                      2.2541      0.19      4.56
 Mexico peso                      13.058      0.09     -0.21
 Chile peso                        549.4      0.11     -4.24
 Colombia peso                    1969.7     -0.24     -1.91
 Peru sol                          2.808      0.00     -0.53
 Argentina peso (interbank)       8.0050     -0.03    -18.89
 Argentina peso (parallel)          10.8      0.56     -7.41

 (Additional reporting by Priscila Jordao and Bruno Federowski;
Editing by Peter Galloway)
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