EMERGING MARKETS-Brazil stocks hit all-time highs on economic outlook

BRASILIA, Jan 16 (Reuters) - Brazilian stocks on Tuesday edged up to an all-time high as optimism over the nation's economic prospects kept an early-year rally alive. The benchmark Bovespa stock index rose 0.3 percent to 79,951, nearing the 80,000 milestone for the first-time ever. Demand for Brazilian assets has been underpinned by expectations that stronger economic growth lifts corporate earnings in 2018. Brazil's gross domestic product is expected to grow almost 3 percent in 2018, turning the page on its deepest recession in decades. Still, analysts say the positive outlook hinges on policymakers' ability to plug a growing budget deficit and implement market-friendly reforms as the nation heads into wide-open presidential elections. "Insufficient progress towards fiscal consolidation could potentially jeopardize the recently achieved gains in macroeconomic performance and asset prices," Goldman Sachs economist Alberto Ramos wrote in a report. Shares in petrochemical Braskem SA led gains on the index after analysts at Itaú BBA upgraded their recommendation on the stock to "outperform" from "market perform." Embraer SA rose slightly after the planemaker hit its output targets for 2017, although fourth-quarter deliveries fell sharply from the year before. Foreign exchange markets saw limited moves, with the Brazilian real nearly flat. The Mexican peso rose for a second day on hopes that U.S. President Donald Trump take a softer stance on trade negotiations. The Mexican currency rallied on Monday following a report that said Trump may be shying away from terminating the North American Free Trade Agreement (NAFTA). Mexico sells around four-fifths of its exports to the United States so it is particularly vulnerable to increased U.S. protectionism.

Key Latin American stock indexes and currencies at 1350 GMT:

Stock indexes daily % YTD % change change


MSCI Emerging Markets 1218.47 0.65 4.51 MSCI LatAm 3011.39 -0.18 6.67 Brazil Bovespa 79951.28 0.25 4.65 Chile IPSA 5745.95 0.22 3.26 Chile IGPA 28911.17 0.28 3.33 Currencies daily % YTD % change change


Brazil real 3.2157 -0.19 3.04 Mexico peso 18.7895 0.28 4.84 Colombia peso 2859.8 -0.01 4.27 Peru sol 3.211 -0.03 0.81 Argentina peso (interbank) 18.7350 0.03 -0.72 Argentina peso (parallel) 19.56 -0.10 -1.69

(Reporting by Bruno Federowski; Editing by Nick Zieminski)