Latam FX, stocks rally on economic recovery hopes

Latin American currencies firmed on

Monday on hopes of an economic recovery as more economies

emerged from pandemic-induced lockdowns, although simmering

U.S.-China trade tensions tempered risk appetite.

Brazil’s real surged 2.1%, extending gains to a

fourth session, while Mexico’s peso appeared to be headed

for its sixth straight winning session. Chile’s currency

gained 0.8%.

In line with broader emerging market peers, regional stocks

rallied. Sao Paulo’s Bovespa index jumped 3.5% to a

12-week high, while Chilean stocks rose 1%.

Volumes were thin as UK and U.S. markets were closed for

holidays in those countries.

Data showing improving business confidence from Europe’s

powerhouse, Germany, reinforced hopes that further easing of

restrictions in countries to curb the spread of the novel

coronavirus would help the global economy emerge from what is

expected to be a deep recession.

“The low point of the slump should now be behind us and

there even is the chance for a short-lived strong rebound in the

coming months,” Carsten Brzeski, chief economist for the euro

zone at ING, said of the data.

The regional picture remained grim, however, with Brazil on

Friday sharply revising downward its 2020 budget deficit and

national debt forecasts to record levels, reflecting the hit to

tax revenues and need for massive emergency spending caused by

the health crisis.

With over 360,000 cases, Brazil is the second worst-hit

country globally by the COVID-19 disease caused by the virus.

Brazil’s President Jair Bolsonaro has been an open critic of

social distancing protocols, calling for increased business

activity to keep the economy afloat.

A federal investigation revealing likely abuse of power has

further hit Bolsonaro’s popularity. And, several ministers from

his administration have resigned in the last two months over

differences with him.

In Mexico, President Andres Manuel Lopez Obrador said a

slowdown in China’s economy this year should allow Mexico to

attract more investment.

U.S.-China trade tensions stewed as the White House warned

of sanctions on China as Beijing pressed ahead with a new

security law on Hong Kong that threatens the city’s status as a

financial hub.

Markets in Argentina and Colombia were closed for national

holidays.

Key Latin American stock indexes and currencies at 1424 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 910.93 0.63

MSCI LatAm 1730.03 3.59

Brazil Bovespa 85064.42 3.52

Mexico IPC 35867.96 0.23

Chile IPSA 3760.80 1

Currencies Latest Daily %

change

Brazil real 5.4565 2.11

Mexico peso 22.6270 0.43

Chile peso 802.2 0.41

Peru sol 3.4197 0.27

(Reporting by Susan Mathew in Bengaluru; editing by Jonathan

Oatis)