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EMERGING MARKETS-Latam FX, stocks rally on upbeat trade news, dovish Fed

By Susan Mathew

(Adds reports of Sino-U.S. trade progress, updates prices) By Susan Mathew Dec 13 (Reuters) - Latin American assets firmed on Thursday, with Brazil stocks at a record high as encouraging developments on the U.S.-China trade front, and accommodative stances from major central banks posited a risk-on sentiment that reflected across global markets. MSCI's index of Latam shares rose more than 1% to its highest in five weeks, while its currency counterpart firmed 0.5%. The U.S. Federal Reserve and the European Central Bank both held on rates and said they were likely to do so in the near term. Emerging markets, which have largely mimicked the Fed's easing cycle this year, have found support from major central banks adopting an accommodative stance in the face of an economically damaging trade war between the United States and China. But, headlines on Thursday suggested trade negotiators were making headway, with sources briefed on talks between the two nations saying that a deal has been reached. Trump had tweeted earlier on Thursday that a deal with China is very close, while The Wall Street Journal reported Washington offered to cancel new tariffs on Chinese good due to take effect on Dec. 15 and slash exiting tariffs on $360 billion. "Having some kind of resolution, even if it's a small step, is still a positive step," said Jin Zhang, portfolio manager & senior research analyst at Vontobel Quality Growth. "It reduces uncertainties both in the capital market and the real economy because tariffs are a headwind for businesses. A reduction of that is positive for global growth." Against this backdrop, global stocks rallied. Mexico stocks climbed 1.3%, while Brazil's benchmark stock index touched a record high, rising 1%, with gains on both being broad-based. Brazil's central bank cut interest rates to a record low on Wednesday, as expected and said it would likely pause on its current easing cycle, which prompted the real to its highest level against the dollar in more than one month. Data also showed Brazil's services activity expanded faster- than-expected in October, indicating that certain facets of Latin America's largest economy were recovering at a strong pace. The Mexican peso was largely subdued, as industrial output in the country fell 1.1% in October from the prior month, and 3% from last year. Colombia stocks rose almost a percent, while Chile stocks extended gains into a fourth day. Argentine markets had a tempered reaction on Thursday with bond prices up, risk spreads down and the peso stable after Economy Minister Martin Guzman laid out his vision for handling the debt crisis in Latin America's No. 3 economy. Key Latin American stock indexes and currencies at 1937 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1073.33 1.43 MSCI LatAm 2816.25 1.34 Brazil Bovespa 112101.98 1.03 Mexico IPC 43195.19 1.32 Chile IPSA 4815.40 0.64 Argentina MerVal 35014.35 -0.015 Colombia COLCAP 1620.13 0.92 Currencies Latest Daily % change Brazil real 4.0928 0.64 Mexico peso 19.0875 0.14 Chile peso 769.2 0.09 Colombia peso 3371.75 0.07 Peru sol 3.375 0.50 Argentina peso 59.8150 0.01 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Chizu Nomiyama)