By Susan Mathew May 25 (Reuters) - Latin American currencies firmed on Monday on hopes of an economic recovery as more economies emerged from pandemic-induced lockdowns, although simmering U.S.-China trade tensions tempered risk appetite. Brazil's real surged 2.1%, extending gains to a fourth session, while Mexico's peso appeared to be headed for its sixth straight winning session. Chile's currency gained 0.8%. In line with broader emerging market peers, regional stocks rallied. Sao Paulo's Bovespa index jumped 3.5% to a 12-week high, while Chilean stocks rose 1%. Volumes were thin as UK and U.S. markets were closed for holidays in those countries. Data showing improving business confidence from Europe's powerhouse, Germany, reinforced hopes that further easing of restrictions in countries to curb the spread of the novel coronavirus would help the global economy emerge from what is expected to be a deep recession. "The low point of the slump should now be behind us and there even is the chance for a short-lived strong rebound in the coming months," Carsten Brzeski, chief economist for the euro zone at ING, said of the data. The regional picture remained grim, however, with Brazil on Friday sharply revising downward its 2020 budget deficit and national debt forecasts to record levels, reflecting the hit to tax revenues and need for massive emergency spending caused by the health crisis. With over 360,000 cases, Brazil is the second worst-hit country globally by the COVID-19 disease caused by the virus. Brazil's President Jair Bolsonaro has been an open critic of social distancing protocols, calling for increased business activity to keep the economy afloat. A federal investigation revealing likely abuse of power has further hit Bolsonaro's popularity. And, several ministers from his administration have resigned in the last two months over differences with him. In Mexico, President Andres Manuel Lopez Obrador said a slowdown in China's economy this year should allow Mexico to attract more investment. U.S.-China trade tensions stewed as the White House warned of sanctions on China as Beijing pressed ahead with a new security law on Hong Kong that threatens the city's status as a financial hub. Markets in Argentina and Colombia were closed for national holidays. Key Latin American stock indexes and currencies at 1424 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 910.93 0.63 MSCI LatAm 1730.03 3.59 Brazil Bovespa 85064.42 3.52 Mexico IPC 35867.96 0.23 Chile IPSA 3760.80 1 Currencies Latest Daily % change Brazil real 5.4565 2.11 Mexico peso 22.6270 0.43 Chile peso 802.2 0.41 Peru sol 3.4197 0.27 (Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis)
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