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EMERGING MARKETS-Brazil stocks hold near all-time highs as optimism lingers

SAO PAULO, Jan 8 (Reuters) - Brazilian stocks held near all-time highs on Monday, underpinned by optimism over the nation's fiscal outlook. The benchmark Bovespa stock index was nearly flat following a seven-day string of gains. Blue chips, such as miner Vale SA and state-controlled oil company Petróleo Brasileiro SA, led the gains. The rally in Brazilian stocks has been supported by investor bets on a market-friendly winner to this year's presidential elections who would advance President Michel Temer's austerity platform. Former President Luiz Inácio Lula da Silva, who has railed against Temer's policies, is leading opinion polls, but he could be barred from running if his conviction for corruption is upheld by a higher court on Jan. 24. Signs that the economic recovery is picking up steam have also supported demand for Brazilian stocks, which are bound to see earnings growth as Latin America's largest economy regains solid footing. "Inflows from foreign investors remain substantial and the pipeline looks strong," analysts at the Magliano brokerage wrote in a report. The Brazilian real was also flat, roughly in line with major Latin American currencies, after strengthening 2.6 percent so far this year. The Mexican peso was down 0.2 percent, while the Chilean peso rose 0.1 percent. Traders in emerging markets have been closely following U.S. economic indicators and remarks by U.S. policymakers for hints over the pace of interest rate hikes there, particularly after a mixed jobs report last week. San Francisco Fed President John Williams told Reuters that the U.S. central bank should hike rates three times this year given that the already strong economy will get a boost from tax cuts. Higher U.S. rates could dampen demand for emerging markets, which offer higher yields.

Key Latin American stock indexes and currencies at 1800 GMT:

Stock indexes daily % YTD % change change

Latest

MSCI Emerging Markets 1205.62 0.38 3.67 MSCI LatAm 2974.18 0.17 4.99 Brazil Bovespa 79043.88 -0.03 3.46 Mexico IPC 50128.71 0.48 1.57 Chile IPSA 5698.14 0.05 2.40 Chile IGPA 28661.21 0.09 2.43 Argentina MerVal 32137.89 -0.16 6.89 Colombia IGBC 11853.55 1.1 4.25 Currencies daily % YTD % change change

Latest

Brazil real 3.2310 0.04 2.55 Mexico peso 19.2090 -0.19 2.55 Chile peso 605.11 0.11 1.58 Colombia peso 2906.3 -0.03 2.60 Peru sol 3.215 -0.09 0.68 Argentina peso (interbank) 18.9900 -0.47 -2.05 Argentina peso (parallel) 19.51 -0.31 -1.44

(Reporting by Bruno Federowski; Editing by Jonathan Oatis)