EMERGING MARKETS-Trade optimism lifts Latam currencies, Argentine election awaited

Sruthi Shankar

awaited@ (Updates market price) Oct 25 (Reuters) - Signs of progress in U.S.-China trade talks helped most Latin American currencies firm on Friday, with Mexico's peso set to record its fourth straight week of gains amid optimism over a revamped trade deal with the United States and Canada. The peso rose 0.3% to 19.06 per dollar, it strongest level in nearly three months, while the Brazilian real, the Colombian peso rose 0.8% and 0.3%, respectively. A senior Mexican official said the country expects U.S. lawmakers to soon begin the formal process of approving the United States-Mexico-Canada trade deal now that President Andres Manuel Lopez Obrador has promised wage increases and funding for labor reforms. The USMCA, signed last year, must win approval in a divided U.S. Congress where Democrats have voiced concerns over the agreement, including its labor and enforcement provisions. Adding to overall optimism, the U.S. Trade Representative's office said U.S. and Chinese trade officials were "close to finalizing" some parts of an agreement. U.S. President Donald Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile. "At the height of trade escalation and uncertainty over the summer, the bias of the market seemed to be towards concern and defensiveness," Morgan Stanley's Hans Redeker wrote in a client note. "Now, the bias, all else equal, seems to be towards risk, calm and carry. The USD sell-off should continue, and we retain our bullish EMFX bias particularly high-yielders like INR, RUB and MXN." The real was set to post gains of more than 2.5% for the week, mainly driven by the Brazil Senate's final approval of a pension reforms bill. Investors will closely watch the central bank meeting next week, with expectations of a deep interest rate cut running high after a series of weak data. One of the most keenly monitored events in Latin America over the weekend will be general elections in Argentina on Sunday, with populist-leaning candidate Alberto Fernandez expected to breeze past business-friendly President Mauricio Macri. Argentina's battered peso weakened 0.3%, even after the central bank intervened heavily to ease its fall. The peso crashed in August when Fernandez trounced Macri in the presidential primary. A group of Argentina's largest bond holders have begun forming a "creditor committee" in preparation for debt negotiations after the country's elections, sources told Reuters. Among stocks, Brazil's Bovespa index scaled yet another lifetime high as investors parsed through a batch of earnings reports. State oil firm Petrobras rallied after saying some of its costs in a key oil-producing region plunged in the third quarter. The firm reported quarterly net income significantly lower than the previous quarter partly because of already announced one-off charges. Miner Vale rose 3.7% despite reporting a weaker-than-forecast rise in quarterly earnings, with analysts citing its strong cash flow, which they said cut its debt to an 11-year low. Brewer Ambev slumped after reporting a 9.7% fall in third-quarter net profit. In Mexico, the benchmark index dropped 0.7% as index heavyweight Grupo Financiero Banorte's third quarter results fell short of analysts' estimates.

Broadcaster Grupo Televisa rallied 7% after company executives expressed frustration with the low share price and said they would explore stepping up buybacks.

Key Latin American stock indexes and currencies at 1938 GMT:

Stock indexes Latest Daily % changeMSCI Emerging Markets 1036.32 -0.11MSCI LatAm 2798.95 -0.14Brazil Bovespa 107395.02 0.38Mexico IPC 43452.76 -0.74Chile IPSA 4943.85 -1.42Argentina MerVal 34230.45 2.253Colombia IGBC 13213.90 0.48Currencies Latest Daily % changeBrazil real 4.0103 0.81Mexico peso 19.0674 0.31Chile peso 726.55 -0.38Colombia peso 3394 0.30Peru sol 3.335 0.38Argentina peso (interbank) 59.9800 -0.30

(Reporting by Sruthi Shankar and Susan Mathew in Bengaluru; Editing by Alistair Bell and Tom Brown)