Peruvian, Chilean Stocks Boosted by Rate Cut Hopes

A final round of interest rate cuts expected in Chile and Peru boosted equity markets in the two Andean countries on Thursday, while Latin American currencies edged higher as trading in the Brazilian real dwindled due to a market holiday.

A sharp rise in metals prices also boosted Chilean and Peruvian stocks, underpinned by hopes that the global economy is slowly starting to emerge from recession.

Investors remained cautious, however, as they await the unfolding of the U.S. earnings season to bring more clarity as to the state of the world's largest economy.

"Markets remained jittery with most emerging-market assets still lacking any real direction, though risk aversion did calm slightly leaving key risk indicators modestly in the black," RBC Capital Markets' analysts wrote in a research note.

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In Latin American equity markets, gains were led by Peru's IGRA stock index, which gained nearly 3 percent. Stock markets in Brazil and Argentina were closed for holidays.

Peruvian miners benefited from a 3.6 percent rally in the price of copper in New York, and also from expectations that the central bank will cut interest rates by at least half a percentage point, from the current level of 3.0 percent, later on Thursday.

Chile's blue-chip IPSA index rose 0.74 percent, also supported by rising metal prices as well as expectations that policymakers will reduce the country's benchmark interest rate by a quarter percentage point later in the day, which would bring the key rate to 0.5 percent.

Mexico's IPC stock index gained 0.7 percent as key U.S. stock indexes eked out modest gains.

On foreign exchange markets, the Mexican peso was trading 0.18 percent stronger at 13.575 per dollar in late session. The Brazilian real gained 1.0 percent to 1.991 per dollar in very light trade in Sao Paulo.

Yield spreads between emerging market bonds and U.S. Treasuries, a key gauge of risk aversion, tightened 16 basis points to 439 basis points on the JPMorgan EMBI+ index.

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