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Latam stocks lifted by stimulus hope, currencies weaken

By Sruthi Shankar Aug 19 (Reuters) – Brazil stocks rose for a second straight session on Monday, as signs of stimulus for China’s slowing economy eased growth worries, although currencies in the region weakened in line with their emerging market peers. Sao Paulo-listed stocks rose about 0.5%, tracking gains for global stock markets after China’s central bank announced key interest rate reforms over the weekend, fueling expectations of an imminent reduction in corporate borrowing costs. State-run oil firm Petrobras rose nearly 2% as oil prices gained following a weekend attack on a Saudi oil facility by Yemen’s Houthi forces. The prospect for fiscal stimulus for Germany also helped the mood, with Mexican stocks jumping more than 1%, while the MSCI’s index of emerging market stocks rose 0.8%. “Equity markets and government bonds are up with the USD losing ground on the back of the expectation that fiscal measures in Germany and changes in PBoC’s monetary policy may avoid or at least delay the widely anticipated economic global recession,” Banorte Research analysts wrote in a note. Financial markets are coming off a rough week, marked by worries about an escalation in the U.S.-China trade war, moves in the U.S. bond market pointing to recession on the horizon and turmoil in Argentine markets. Currencies, meanwhile, were on the back foot as investors speculated about the path of U.S. interest rates ahead of U.S. Federal Reserve Chairman Jerome Powell’s speech at an annual meeting of central bankers in Jackson Hole later this week. The Brazilian real and the Mexican peso dropped about 0.7%, while the Chilean peso fell 0.4% after central bank data showed the country’s gross domestic product grew 1.9% in the second-quarter of 2019 as slumping global trade and falling copper prices continue to take their toll. Markets in Argentina were closed for a local holiday, and investors will watch for signs of further weakness when markets open for trading after ratings agencies Fitch and Standard & Poor’s downgraded Argentina’s sovereign debt rating and Treasury Minister Nicolas Dujovne resigned amid economic crisis. Argentine markets have collapsed since last week’s primary vote saw opposition candidate Alberto Fernandez trouncing business friendly President Mauricio Macri. The cost of insuring against an Argentine sovereign default rose after Fernandez said the country would struggle under present conditions to repay a loan to the International Monetary Fund. Latin American stock indexes and currencies at 1455 GMT: MSCI Emerging Markets 978.35 0.83 MSCI LatAm 2599.97 -0.38 Brazil Bovespa 100313.38 0.51 Mexico IPC 39623.24 0.72 Chile IPSA 4823.77 0.53 Argentina MerVal 30406.65 -2.038 Colombia IGBC 12527.47 1.1 Currencies Latest Daily % change Brazil real 4.0311 -0.70 Mexico peso 19.8020 -0.77 Chile peso 711.7 -0.41 Colombia peso 3438.72 -0.16 Peru sol 3.384 -0.18 Argentina peso – – (interbank) (Reporting by Sruthi Shankar in Bengaluru Editing by Chris Reese)

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