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EMERGING MARKETS-Latam assets rise as U.S.-China trade tensions ease; Brazil's real firms

By Shreyashi Sanyal and Sagarika Jaisinghani

* Brazilian real, Mexican peso rise slightly * U.S.-China trade deal "potentially very close" - Trump By Shreyashi Sanyal and Sagarika Jaisinghani Nov 22 (Reuters) - Latin American assets edged higher on Friday as investors turned optimistic about a U.S.-China trade truce after U.S. President Donald Trump said a deal was "potentially very close", while Brazil's real firmed on hopes of more monetary stimulus. An index of Latin American currencies gained 0.6%, while a basket tracking the region's stocks firmed 1%. The Brazilian real rose 0.4% as the country's inflation fell to the second-lowest level in more than two decades, a figure likely to give the central bank extra cover to reduce interest rates again next month. Central banks in developing economies have been ahead of the curve in lowering borrowing costs to combat slowing growth. Last week, the Mexican central bank cut rates for the third time this year. Mexico's peso edged up against a flat dollar after data showed annual inflation accelerated slightly more than expected in the first half of November at an annual rate. "We doubt this will be enough to dissuade (Mexican) policymakers from cutting their key interest rates in December," said John Ashbourne, senior emerging markets economist at Capital Economics. Global stocks also inched up as U.S. President Donald Trump told Fox News a trade deal with China was "potentially very close," following remarks from Beijing that it wanted to work out an initial agreement to halt the prolonged tariff dispute. The mood in financial markets was dulled this week by a diplomatic row between the world's top two economies after Washington passed a bill supporting protesters in Hong Kong. Reuters also reported that the trade deal could slide into 2020. The Latin American currency index has fallen about 4% since its October peak, bogged down by worries over anti-government protests in Chile and unsuccessful oil auctions in Brazil. Investors have also kept a close eye on political developments in Colombia. Colombian unions, student groups and other protesters marched on Thursday against rumored economic reform plans and amid rising discontent with the government of President Ivan Duque. The Colombian peso had a tepid reaction to the news as traders pointed to the protests being mostly peaceful. Brazil's stock index rose 0.7% and was on course for its best week in four. Argentina's MerVal index gained nearly 1%, while the Mexico stock index inched up 0.1%. Key Latin American stock indexes and currencies at 1455 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1047.30 0.26 MSCI LatAm 2706.44 1.1 Brazil Bovespa 108240.76 0.69 Mexico IPC 43316.02 0.14 Chile SPIPSA 4729.90 -0.3 Argentina MerVal 33533.95 0.86 Colombia COLCAP 1601.51 0.11 Currencies Latest Daily % change Brazil real 4.1764 0.37 Mexico peso 19.3620 0.10 Chile peso 795 0.01 Colombia peso 3402.47 0.42 Peru sol 3.3778 -0.17 Argentina peso (interbank) 59.7800 0.05 (Reporting by Shreyashi Sanyal and Sagarika Jaisinghani in Bengaluru Editing by Alistair Bell)