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EMERGING MARKETS-Latam FX firms as dollar softens, stocks drop on trade jitters

By Sruthi Shankar

(Updates with closing prices) By Sruthi Shankar July 17 (Reuters) - A soft dollar aided gains in Latin American currencies on Wednesday, although stock markets in the region came under pressure from an escalation in trade tensions between the United States and China. The Brazilian real edged higher, drawing optimism from progress in the government's pension reform bill, which is set to go through a second round of voting in Brazil's lower house of Congress next week. Despite a delay in the process, investors are hopeful about its approval in both houses of Congress and are looking for more policy moves beyond the pension reforms. "The big question in Brasilia is how much further the administration's ambitious reform agenda can advance with a president lacking a working majority in Congress," Eurasia Group's Christopher Garman wrote in a note. "We expect much of it will. But a lot may depend on whether Brazil finds itself in a low-growth trap." Brazil's government is planning to unveil a fiscal stimulus package worth 63 billion reais ($16.8 billion) in the coming days to kick-start a flagging economic recovery, newspaper Valor Economico reported. Brazil's Bovespa index rose 0.2%, with shares of retailer Magazine Luiza jumping to the top of the index with a 5% gain after analysts at Bradesco upgraded the company's stock to "outperform." Shares in state-controlled power utility Centrais Eletricas Brasileiras SA rose about 4% after a local newspaper reported the government was preparing a new bill to transfer the company's controlling stake to private investors. Stock markets elsewhere in the region were hit by trade concerns after U.S. President Donald Trump renewed his threat to impose tariffs on another $325 billion in Chinese goods on Tuesday. Mexican stocks were weighed down by shares in mining and transport company Grupo Mexico, which dropped for a seventh session in the wake of a sulfuric acid spill at a site that belonged to the company. Telecom operator America Movil rose 3% after a surge in its second-quarter net profit on the back of foreign exchange gains. The Mexican peso which took a hit in the previous session after the government's new Pemex plan failed to impress investors, managed to partly recover, moving 0.2% higher. The Colombian and the Argentine pesos outperformed their Latin American peers with a 0.5% gain as the dollar edged lower. Key Latin American stock indexes and currencies at 1959 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1,055.18 -0.49 MSCI LatAm 2,930.01 -0.11 Brazil Bovespa 104,009.75 0.23 Mexico IPC 42,544.40 -1.02 Chile IPSA 50,45.39 -0.61 Argentina MerVal 41,444.96 -0.82 Colombia IGBC 13,093.28 -0.3 Currencies Latest Daily % change Brazil real 3.7600 0.28 Mexico peso 19.0570 0.15 Chile peso 682 -0.22 Colombia peso 3,183 0.49 Peru sol 3.288 -0.03 Argentina peso (interbank) 42.4900 0.52 (Reporting by Sruthi Shankar in Bengaluru; editing by Jonathan Oatis)