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EMERGING MARKETS-Mexican shares join global rally; Brazil's real gives up gains

By Susan Mathew

* Investors cautious about lasting U.S.-China trade truce * Brazil's real gives up gains on rising rate cut expectations * U.S. senate passes USMCA; Mexican shares touch one month peak By Susan Mathew Jan 16 (Reuters) - Latin American currencies traded flat to lower on Thursday with Brazil's real giving up gains made on upbeat economic data, while Mexican shares touched a one-month high in line with a rally in global markets. Global markets cheered the signing of a much-awaited Phase 1 trade deal between the United States and China on Wednesday, but, as focus turns to the second phase of negotiations, analysts warn against exuberance as China's target of $200 billion in additional purchases appears daunting. "It's a bit of a warning sign, where we're not escalating anymore, but things aren't exactly improving," said Win Thin, head of emerging market currency strategy at Brown Brothers Harriman. "It's positive for EMs, but I think we've gotten a lot of big moves in EM already and further gains will be tough going forward," he said. Brazil's real had firmed as much as 0.4% earlier in the session, but later wiped away those gains. Data on Thursday showed Brazilian economic activity rose in November. But analysts warn that a recent spate of weak economic indicators could set the stage for another interest rate cut at the next central bank meeting in February after four consecutive reductions in 2019 that took rates to record lows. An economy ministry summary of private-sector forecasts on Thursday, however, showed the Brazilian government's fiscal outlook for this year and next continues to improve. Analysts at UBS also held a positive outlook for Brazil: economic recovery driving superior earnings growth, continued reform momentum driving a valuation premium to EM peers, and record-low real rates supporting domestic and international funds' allocation to equities, could see Brazil equities outperform EM equities over the next six to 12 months, they said. In Mexico, the peso traded flat, while stocks scaled a one-month high, up 1.3%, after two sessions of losses. The U.S. Senate on Thursday approved a revamp of the 26-year-old North American Free Trade Agreement, or NAFTA. The deal is still pending approval in Canada still before it can take effect, but little resistance is expected. Argentina's peso was also muted, as data showed consumer prices rose 53.8% in 2019, marking the biggest increase in 28 years and posing a major challenge for the new president, but the number was below a consensus estimate. Key Latin American stock indexes and currencies at 1941 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1139.20 0.11 MSCI LatAm 2867.82 -0.1 Brazil Bovespa 116122.88 -0.25 Mexico IPC 45020.50 1.28 Chile IPSA 4893.52 0.2 Argentina MerVal 42149.26 2.189 Colombia COLCAP 1646.12 -0.16 Currencies Latest Daily % change Brazil real 4.1908 -0.17 Mexico peso 18.7927 -0.05 Chile peso 775.5 -0.04 Colombia peso 3320.85 -0.75 Peru sol 3.322 0.03 Argentina peso 59.9750 -0.03 (interbank) (Reporting by Sagarika Jaisinghani and Ambar Warrick in Bengaluru; editing by Jonathan Oatis)