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EMERGING MARKETS-Most Latam FX, stocks rally on hopes of strong recovery

Susan Mathew

* Mexican peso hits highest since mid-April * Colombian peso at 10-week high, Chilean peso hits 11-week high * Stocks rally on hopes of strong first half in 2021 * Negotiators with creditors may extend beyond May 22 - Argentina By Susan Mathew May 20 (Reuters) - A rally in commodity prices lifted Latin American stocks and currencies on Wednesday, with Mexico's peso hitting a five-week high, as markets looked to a strong post-pandemic recovery. In line with a rally on Wall Street, most regional bourses traded between 0.% and 1.7% higher, although Mexican stocks extended losses after posting their worst session in almost two months on Tuesday as new rules for the electricity sector increased tensions between the private sector and government. "The stock market is seeing the first and second quarters of 2021 as having very good results. Meaning the bounce back," said Robert Lutts, president and chief investment officer at Cabot Wealth Management Inc. "We're going to be past a lot of the troubles with COVID-19 by then and economies are going to be much more open, and we're going to a see a hidden benefit from this whole crisis: Companies are going to be much more efficient." Brazilian airline Azul shot up almost 16% on plans to increase daily flights by 46% in June compared with May. Other major gainers were oil giant Petrobras and iron ore miner Vale. Latin American currencies firmed against a weaker dollar despite a surging number of new COVID-19 cases in the region's largest economy, Brazil, where the political picture became cloudier after yet another resignation from President Jair Bolsonaro's government. Culture Secretary Regina Duarte resigned after roughly two months in the post, citing personal reasons. This followed resignations by the justice minister, as well as the newly appointed health minister following his predecessor's ouster in April. Against a weaker dollar, Brazil's real rallied 1.5%. As oil prices surged, Mexico's peso rose 1.7%, while Colombia's currency hit a 10-week high. Higher copper prices propelled Chile's peso to its highest in 11 weeks. But given the bleak near-term future, demand for real assets like gold could keep currencies on the back foot, said Lutts. Recent economic data from the region has been dismal as lockdowns hit economic activity. Analysts increasingly revise expectations lower. "(Brazil) Activity data are likely to post new record declines in April," said Wilson Ferrarezi, an economist at TS Lombard. "Some sectors may not begin to recover before early 2021, especially as demand remains subdued amid rising unemployment. This, coupled with mounting political uncertainty, will further hinder any rebound in consumer and business sentiment." In Argentina, there is a "big chance" for negotiations with creditors to extend beyond a May 22 deadline, Finance Minister Martin Guzman said, assuring "constructive" dialogue between parties. Key Latin American stock indexes and currencies at 1458 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 934.23 0.97 MSCI LatAm 1643.68 2.21 Brazil Bovespa 82152.42 1.75 Mexico IPC 35613.80 -0.69 Chile IPSA 3751.94 0.59 Argentina MerVal 39964.25 1.461 Colombia COLCAP 1066.86 -0.07 Currencies Latest Daily % change Brazil real 5.6720 1.54 Mexico peso 23.2760 1.74 Chile peso 807 1.34 Colombia peso 3799.48 0.86 Peru sol 3.4047 0.63 Argentina peso 67.9900 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis)