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Brazil stocks record best quarter since 2003; Real falls

* Brazil’s real down nearly 5% for Q2 * Brazil stocks set to outperform broader EM in Q2 * Argentine peso among worst Q2 performers (Adds background, updates prices) By Ambar Warrick and Shreyashi Sanyal June 30 (Reuters) – Brazil’s real led Latin American currency losses on Tuesday on a raft of weak data, while the country’s stocks were set for the best quarter in 16-1/2 years as investors sought better returns in equities. The real fell 0.6%, on track to lose nearly 5% for the second quarter, right after its worst quarterly loss in nearly 17 years. The currency, once considered a viable option for carry trade, saw its standing slowly slip this year on continued interest rate cuts by Brazil’s central bank and uncertainty over the coronavirus pandemic. Conversely, Brazilian stocks were set to add 30% for the quarter, their best performance since 2003, as they recovered from sharp losses in the prior quarter. The Bovespa index was set to outperform a 17% rise in its broader emerging market peers for the quarter. “The lower returns from sovereign fixed-income instruments have forced investors out of their traditional comfort zone of higher-yielding government bonds and into riskier assets, and this has been a major factor in the resilient domestic equity market in Brazil,” wrote Wilson Ferrarezi, Brazil Economist at TS Lombard. For the day, stocks fell about 0.3% after data showed Brazil’s national debt and government deficit hitting record highs in May. Separate data showed the country’s unemployment rate hitting a two-year high. Other Latin American risk assets also fell, as a spike in coronavirus infections in the developed world raised concerns over new curbs on social and business activity. Mexico’s peso fell 0.5%, tracking weakness in oil prices. Still, the currency was set to add about 2.3% for the quarter. Mexican stocks dropped about 0.5%, but were set for their best quarter since 2011. Chilean stocks traded flat, while Colombian equities shed 0.2% as both markets resumed trade after a long weekend. Colombia’s peso weakened as the country’s central bank cut its benchmark interest rate by 25 basis points to 2.5% and announced further liquidity measures to cope with low oil prices and the pandemic. Argentina’s peso was among the worst quarterly performers in Latin America, as investors continued to fret over the country’s negotiations with its sovereign debt holders. Key Latin American stock indexes and currencies at 2008 GMT: Stock indexes Latest Daily % change MSCI Emerging 996.57 0.26 Markets MSCI LatAm 1884.89 -0.16 Brazil Bovespa 95774.78 0.04 Mexico IPC 37715.04 -0.14 Chile IPSA 3959.26 -0.79 Argentina MerVal 38609.52 -4.214 Colombia COLCAP 1111.80 0.1 Currencies Latest Daily % change Brazil real 5.4491 -0.19 Mexico peso 22.9936 0.29 Chile peso 820.9 -0.18 Colombia peso 3754.75 -0.22 Peru sol 3.5408 -0.37 Argentina peso 70.4500 -0.07 (interbank) Argentina peso 122 5.74 (parallel) (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru; Editing by Sandra Maler and Richard Chang)

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