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Oil-linked Latam currencies outperform for week

* Colombian, Mexican pesos lead weekly gains * Chilean stocks outperform for the week * Argentine assets sole losers for the week (Updates prices, adds comments) By Ambar Warrick and Shreyashi Sanyal July 3 (Reuters) – Latin American stocks and currencies remained muted on Friday as a U.S. holiday provided few trading cues, but were set to end the week with gains as bets grew for a recovery from the economic effects of the COVID-19 pandemic. Strong economic readings from China and the United States through the week had helped bolster risk appetite, although a drastic rise in coronavirus cases capped broader gains. Still, the positive news drove gains in commodity markets, which in turn saw oil and metal-linked assets in Latin America outperform for the week. It also helped regional risk assets weather a raft of weak local economic data. The currencies of oil exporters Colombia and Mexico were set to outperform regional peers for the week, riding on strength in the crude market as bets for demand recovery grew. “Following a precipitous decline in global and emerging markets activity in Q2, we expect growth across EM economies to bounce back relatively sharply towards the end of this year and into 2021,” analysts at Goldman Sachs wrote in a client note. Brazil’s real edged up for the day, while stocks fell after data showed economic activity in the country shrank in June for a fourth straight month due to coronavirus. The reading was slightly stronger than the prior month, as Latin America’s largest economy slowly ground back into gear from coronavirus-related lockdowns. The real and Brazilian stocks added 3% for the week. Copper exporter Chile’s stocks outperformed regional peers for the week with a 5.3% gain. The peso had also benefited from stronger copper prices through the week. Still, economic activity in the world’s largest copper producer remained constrained due to the coronavirus. Investors continued to watch for increasing infections as major economies scaled back virus-related curbs. While reopening has helped economic activity recover, it also leaves the door open for future lockdowns if infections continue to spike. “This is not a ‘bubble, burst bubble, sort out bubble, recover’ cycle. This is an abrupt switching off of economies, followed by a relatively abrupt switching back on. Companies and consumers are not likely to react as they have in the past,” wrote Paul Donovan, Chief Economist of UBS Global Wealth Management. Argentine stocks and the peso were the sole weekly losers in Latin America. Investors continued to fret over the country’s negotiations over the repayment of its distressed bonds, with a deadline for a deal looming later in the month. Key Latin American stock indexes and currencies at 1957 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1033.29 0.96 MSCI LatAm 1954.72 0.74 Brazil Bovespa 96657.46 0.44 Mexico IPC 37812.52 -0.22 Chile IPSA 4203.80 0.64 Argentina MerVal 39819.67 0.807 Colombia COLCAP 1127.36 0.75 Currencies Latest Daily % change Brazil real 5.3199 0.53 Mexico peso 22.3840 0.36 Chile peso 802.4 -0.11 Colombia peso 3644.53 -0.01 Peru sol 3.5387 -0.51 Argentina peso (interbank) 70.6300 -0.07 Argentina peso (parallel) 123 4.88 (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru; Editing by Alistair Bell and Daniel Wallis)


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