April 4, 2014 / 6:20 PM / 4 years ago

EMERGING MARKETS-Latam markets gain after U.S. payrolls report

By Asher Levine
    SAO PAULO, April 4 (Reuters) - Latin American stocks and
currencies rose on Friday after U.S. payrolls data eased
investor concerns that interest rates in the world's largest
economy would rise sooner than expected.
    The MSCI Latin American stock index erased
the previous session's losses, while Brazil's currency, the real
, spiked nearly 2 percent against the dollar.
    Data on Friday showed the U.S. labor market emerged
surprisingly strong from a severe winter, though slightly below
Wall Street's expectations. Nonfarm payrolls increased by
192,000 jobs last month, while the unemployment rate was
unchanged at 6.7 percent. 
    "Unemployment at this level ends up being good news for
emerging markets, because investors perceive that interest rates
could stay low for a longer time," said Gustavo Mendonca, an
economist with Saga Capital in Rio de Janeiro.
    Brazil's Bovespa stock index extended its longer
than two-weeks rally after investors paused to take profits in
the previous session. 
    Gains were driven by the most-widely traded shares, such as
state-run oil firm Petroleo Brasileiro SA, known as
Petrobras, and mining giant Vale SA. Both stocks tend
to attract foreign investors seeking exposure to local stocks
due to their high liquidity.
    "Inflows are making all the difference," said Alvaro
Bandeira, an analyst with Orama Investimentos in Rio de Janeiro.
    Net foreign fund flows into the Bovespa for 2014 rose to 4.2
billion reais through April 2, whereas the Bovespa saw a net
outflow for the year as recently as late February.
    Some analysts point to funds being reallocated from Russia
due to geopolitical tensions over Crimea.
    Local investors were also keeping their eyes on a poll
scheduled to be released on Saturday. Some investors are betting
that a loss by President Dilma Rousseff in October's
presidential election could lead to sharp gains in the Bovespa.
    Mexican shares made up for Thursday's losses, driven
by gains in cement producer Cemex, while Chile's
bourse edged lower.
    Currencies strengthened across the region, with Brazil's
real posting a 1.6 percent gain against the dollar.
    The real was further bolstered after the central bank rolled
over expiring currency swap contracts on Friday, which provide
investors with a hedge against depreciation in the real.
    "It seems like the central bank is committed to remaining in
the market, despite the fall in the dollar (against the real),
said Daniel Cunha, an economist with XP Investimentos in Sao
Paulo, adding that the program was likely maintained in order to
avoid fueling currency volatility.
    Elsewhere in Latin America, Chile's peso strengthened
slightly, in line with other emerging markets, despite a drop in
the price of copper, the country's main export.
    The Mexican peso strengthened about 0.5 percent.
    Most of Mexico's central bankers think that a spike in
inflation has likely passed and that short-term risks to growth
would push them to cut their growth outlook, minutes released on
Friday showed. 
    Key Latin American stock indexes and currencies at 1737 GMT:
 Stock indexes                             daily %     YTD %
                               Latest       change    change
 MSCI Emerging Markets           1003.83      0.37     -0.25
 MSCI LatAm                      3248.77      1.45      0.04
 Brazil Bovespa                 51671.05      0.51      0.32
 Mexico IPC                     40858.38      0.73     -4.37
 Chile IPSA                      3794.23      0.02      2.57
 Chile IGPA                     18636.19      0.04      2.24
 Argentina MerVal                6425.45     -1.12     19.19
 Colombia IGBC                  13988.53     -0.62      7.02
 Peru IGRA                      14348.39      0.46     -8.92
 Venezuela IBC                   2523.56      0.01     -7.78
 Currencies                                daily %     YTD %
                                            change    change
 Brazil real                      2.2452      1.62      4.97
 Mexico peso                      13.052      0.52     -0.17
 Chile peso                        555.4      0.31     -5.28
 Colombia peso                   1952.24      0.78     -1.04
 Peru sol                          2.808      0.00     -0.53
 Argentina peso (interbank)       8.0000      0.03    -18.84
 Argentina peso (parallel)         10.56      1.23     -5.30
 (Additional reporting by Bruno Federowski and Priscila Jordao;
Editing by Phil Berlowitz)

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