EMERGING MARKETS-Latam stocks, FX gain on positive Chinese data, vaccine hopes

Ambar Warrick
·2 min read

* Brazil's real adds 0.8% after strong November * Brazilian manufacturing retreats from record highs By Ambar Warrick Dec 1 (Reuters) - Brazil's real led gains across Latin America on Tuesday, as most other stocks and currencies in the region rose after positive Chinese data and progress in a COVID-19 vaccine drove buying into risk-driven assets. The real added 0.8%, even as the pace of expansion in the country's manufacturing sector slowed in November from record levels the prior month. But the reading was comfortably in expansion territory, indicating that economic activity in Latin America's largest economy was on the uptrend. Most other regional currencies rose, with the MSCI's index of Latam currencies adding more than 1% after positive Chinese factory data and hopes of regulatory approval for COVID-19 vaccines drove money out of the dollar and into risk. Latam stocks and currencies had clocked large gains in November on optimism over a vaccine and stable U.S. politics. But most currencies still traded lower for the year, due to near-term uncertainties caused by the virus. "We remain optimistic that EM economies can weather the deleterious impact of renewed lockdowns far better this time than during the initial coronavirus surge," Ilya Gofshteyn, senior EM macro strategist at Standard Chartered, wrote in a note. "We believe Latam FX will benefit from the global backdrop, and we remain particularly constructive on the Mexican peso... there remains ample room for Mexico asset ownership to pick up before we would categorise positioning as stretched." Mexico's peso rose 0.5% to the dollar. The currency has benefited recently from optimism over improved U.S.-Mexico trade relations, as well as increased carry interest and higher oil prices. Investors were awaiting a reading on Mexican manufacturing data later in the day. Colombia's peso rose nearly 0.7%. A Reuters poll showed that Colombian inflation expectations for this year and the next fell as domestic demand remained under pressure from the pandemic. Latin American stocks also rose for the day, tracking gains across the broader emerging space. The MSCI's index of regional stocks rose more than 2%, with Brazilian and Chilean stocks leading gains. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1222.02 1.41 MSCI LatAm 2249.01 2.38 Brazil Bovespa 110469.57 1.45 Mexico IPC - - Chile IPSA 4087.87 1.36 Argentina MerVal - - Colombia COLCAP 1258.00 - Currencies Latest Daily % change Brazil real 5.3047 0.77 Mexico peso 20.0669 0.49 Chile peso 760.9 -0.03 Colombia peso 3571.01 0.65 Peru sol 3.5957 0.28 Argentina peso 81.3700 -0.07 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Nick Macfie)