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EMERGING MARKETS-Latam stocks rally; Brazil's Bovespa at all-time high

Agamoni Ghosh

(Recasts throughout) Jan 4 (Reuters) - Latin American stock markets rallied on Friday with Brazil's benchmark index notching a record-high close for the third straight day as investors cheered fresh U.S.-China trade talks, a strong U.S. payrolls report and a perceived dovish stance from the U.S. Federal Reserve. Equities around the globe rallied as U.S. employment data pointed to economic strength and on news that China and the United States will hold trade talks in Beijing next week. Stocks surged further after U.S. Federal Reserve Chairman Jerome Powell said the central bank will be sensitive to the downside risks the market is pricing in. MSCI's index for Latin American stocks posted its best week since July 2017, pulled higher by robust gains on Brazil's Bovespa index which logged a new all-time high for the third consecutive day. "The biggest driver was global factors today, mostly on the news coming from abroad," said Mauricio Oreng, senior Brazil strategist at Rabobank. Bovespa began the day with pressure on profits, following statements by President Jair Bolsonaro about a pension reform for minimum retirement ages significantly lower than those proposed by his predecessor, but later turned positive after the opening of U.S. stock markets. "For the time being we don't have solid information on the actual plans of Bolsonaro, so markets are on a wait-and-see mood," added Oreng. Buenos Aires' Merval index outperformed all regional stock markets by jumping 4 percent on the day, also posting its biggest weekly gain since the first week of November 2018. Indexes in Mexico, Chile and Colombia also rose between 0.3 percent and 1.1 percent on the overall upbeat sentiment from abroad. A soft dollar, meanwhile, helped prop up currencies in the region, after Powell said the central bank would be patient with its monetary policy which investors largely read as dovish. "It's sort of tentative. We may see a lot more choppiness until the Fed clearly says it will no longer hike rates," said Gustavo Rangel, chief economist, LATAM, at ING Markets. Most Latin American currencies were set to end the week higher with Brazil's real set to post its best week since October 2018. Mexico's peso also edged higher for the week, but remained under pressure with the central bank signaling the need for monetary policy adjustment in wake of high inflation. "Although Banxico remains solid as a rock, most members of the board see upward risks to inflation and continue to support a restrictive stance in the future," said Antje Praefcke, senior FX analyst at Commerzbank in a note. The Chilean peso advanced to its highest level in three weeks, driven by a strong rebound in the price of copper, the country's main export, as U.S.-China trade optimism lifted the industrial metal. Argentina's peso which halved in value in 2018 against the dollar as the country slipped into financial crisis, started the year on a positive note, logging its best week in over two months. Although a loan from the International Monetary Fund to shore up its finances and halt the currency's plunge has helped the economy, President Mauricio Macri's austerity policies have failed to bring his promise of "zero inflation." Former President Cristina Fernandez de Kirchner, remembered for her social benefit programs, is positioning herself to challenge Macri in presidential elections later this year. "It's temporary reprieve for the peso. When it gets to mid-year we are likely to see markets choppy again due to the presidential elections," said Rabobank's Oreng.

Key Latin American stock indexes and currencies at 2115

Stock indexes daily % change

Latest

MSCI Emerging Markets 966.59 1.79MSCI LatAm 2741.48 1.76Brazil Bovespa 91840.79 0.35Mexico IPC 42470.04 1.01Chile IPSA 5189.20 1.17Argentina MerVal 32303.05 3.98Colombia IGBC 11420.55 0.68Currencies daily % change

Latest

Brazil real 3.7144 1.12Mexico peso 19.4255 1.01Chile peso 681.8 1.82Colombia peso 3191.65 1.61Peru sol 3.345 0.66Argentina peso (interbank) 37.3500 0.29

(Reporting by Agamoni Ghosh in Bengaluru Editing by Matthew Lewis)