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EMERGING MARKETS-Trade, Brexit deal hopes spark rally in Latam assets

By Sruthi Shankar

By Sruthi Shankar Oct 11 (Reuters) - The Mexican peso hit a two-month high on Friday, while Latin American stocks jumped nearly 2% as optimism over U.S.-China trade talks and a Brexit deal spurred a rush for risky assets. The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.7% to 19.31 per dollar, while the Chilean and the Colombian pesos rallied about 0.8%, getting extra boost from a rally in metal and oil prices. With the U.S. dollar down about 0.4% against a basket of major currencies, emerging market currencies were on course for their biggest percentage gain in more than five weeks, rising 0.6%. The rally came as U.S. President Donald Trump said U.S.-China trade talks were going well as the second day of top-level negotiations got under way. Both sides have slapped duties on hundreds of billions of dollars of goods during the 15-month trade dispute, which has shaken financial markets and uprooted global supply chains. Investors are hoping the two sides will agree to a deal that could avert further retaliatory measures, while expectations of a last-minute Brexit deal between the European Union and Britain as well as approval of a North American trade deal all added to the optimism. "Global markets are heading into the end of the week on a strong note as US-China trade talks and Brexit negotiations appear to be heading toward a positive resolution," TD Securities' Ned Rumpeltin wrote in a note. "We find it difficult to forget that the history of both the Brexit and trade disputes have been a series of false dawns." An index of Latin American stocks rallied, with Brazil's Bovepsa leading gains with a 2% rise. The real, however, posted minimal gains among its peers as data showed services sector activity fell in August more steeply than economists had expected, another indication that an economic recovery remained sluggish. Mexico's IPC index rose 1% after upbeat industrial output data. The finance ministry said that recent operations to reduce the debt burden of state oil company Pemex have refinanced liabilities worth $20.1 billion. Colombia's and Chile's stock markets also gained 1% each as oil prices rallied following reports of an attack on an Iranian state-owned tanker, while copper prices gained on trade optimism. Key Latin American stock indexes and currencies at 1432 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1014.67 1.82 MSCI LatAm 2705.57 1.85 Brazil Bovespa 104039.89 2.18 Mexico IPC 43363.37 1.01 Chile IPSA 5112.42 1.11 Argentina MerVal 32185.25 1.393 Colombia IGBC 12990.70 0.9 Currencies Latest Daily % change Brazil real 4.1094 0.33 Mexico peso 19.3070 0.69 Chile peso 712.95 0.69 Colombia peso 3425.72 0.93 Peru sol 3.3548 0.30 Argentina peso (interbank) 58.0200 -0.07 (Reporting by Sruthi Shankar in Bengaluru Editing by Matthew Lewis)