EMERGING MARKETS-Brazil's real jumps 2%; Argentine stocks shine

Ambar Warrick and Susan Mathew
·3 min read

* Real rises in catch-up trade * Mexico's peso recovers from 2-week low * Petrobras Distribuidora lifts Brazil's Bovespa * Best day in two months for Merval as YPF surges (Updates prices) By Ambar Warrick and Susan Mathew Jan 26 (Reuters) - Brazil's real rose 2.2% on Tuesday in catch-up trade after a long weekend, although sentiment in Latin America was dampened by increased COVID-19 infections and concerns over fiscal health in the region. With Brazil's Economy Minister Paulo Guedes saying he expects economic growth of 3.5% this year, the real recovered from steep losses last week sparked by renewed concerns over fiscal spending, as well as the central bank saying it would not hike interest rates any time soon. Breaking a four-day losing streak, Brazil's Bovespa stock index rose 0.2%. Fuel distributor Petrobras Distribuidora SA provided the biggest boost, up almost 12%, after Wilson Ferreira Jr., the former chief executive of state-run power firm Centrais Eletricas Brasileiras was set to take charge of the firm. Argentina's Merval stock index posted its best day in two months, with state energy company YPF jumping 9% on sweetening its offer to creditors. YPF's shares had taken beating after its plans to swap some $6.2 billion in bonds sparked a fierce backlash from investors. "We believe a rebound in Latam equity markets would be an important step in turning around Latam FX performance," Ilya Gofshteyn, senior EM macro strategist at Standard Chartered, wrote in a note. "The boost to FX from inflows to Latam asset markets will be greater than the drag from cross-currency trades using Latam currencies." Concerns over the spread of the coronavirus in major economies, uncertainty over vaccine distribution and increased government deficits from fiscal spending have made Latin American assets relatively less attractive than their emerging market peers. A difference in yields with broader emerging markets has also made currencies such as the real and Mexican peso a less desirable means for carry trades. Mexico's peso rose 0.7% after a three-day losing streak. The country has the fourth-highest death toll from the pandemic in the world, which has weighed on demand for its assets. As oil prices fell, crude exporter Colombia's peso lost 0.7% to extend losses to a fourth straight session. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1388.77 -1.52 MSCI LatAm 2396.74 1.55 Brazil Bovespa 117565.24 0.16 Mexico IPC 44793.68 -0.74 Chile IPSA 4476.04 -0.29 Argentina MerVal 49200.84 3.646 Colombia COLCAP 1395.50 -0.15 Currencies Latest Daily % change Brazil real 5.3497 2.26 Mexico peso 19.9821 0.61 Chile peso 732.2 0.04 Colombia peso 3598.28 -0.34 Peru sol 3.6437 0.00 Argentina peso 87.0100 -0.11 (interbank) (Reporting by Ambar Warrick in Bengaluru Editing by Paul Simao and Nick Zieminski)