* Sol recovers from worst day in five months
* Morgan Stanley, BlackRock bullish on EM
* Latam stocks come off two-month high
* Mexican peso near 3-mth highs amid carry trade prospects
By Ambar Warrick
April 20 (Reuters) - Strength in copper prices supported
Chile's peso and Peru's sol, with the latter stabilizing after
steep losses on expectations for a socialist government, while
other Latin American currencies traded sideways.
Chile's peso led gains in early trade, rising 0.7% to
a more than four-month high as copper prices neared 10-year
highs on optimism over recovering global demand.
World no. 2 copper exporter Peru's sol also rose,
recovering from its worst session in more than five months,
after the first opinion poll ahead of a presidential run-off
election in June indicated a win for socialist candidate Pedro
Castillo.
Mexico's peso hovered around three-month highs, with
analysts citing the currency having prime conditions for carry
trades, along with EM peer South Africa's rand.
The Mexican economy shrank in March due to the pandemic but
is expected to rebound as a U.S. recovery picks up.
Sentiment over emerging market assets was helped by major
investment bank Morgan Stanley going bullish on
currencies and bonds, citing stability in U.S. yields.
BlackRock, the world's largest asset manager, espoused a
similar stance on Monday.
Emerging market assets have come under pressure this year as
expectations of policy tightening by the Federal Reserve pushed
up U.S. Treasury yields.
But continued dovish signals from the U.S. central bank
doused this notion, resulting in large drops in yields and
improving capital flows into emerging markets.
Latin American markets have lagged their peers due to a
damaging COVID-19 resurgence in the region, and were mostly
trading flat to lower for the day.
Brazil's real rose 0.4%, hovering just below a near
one-month high, as the 2021 budget was sent to President Jair
Bolsonaro for approval after an initial delay.
But the rapid spread of COVID-19 in the country has dulled
its economic outlook, with the government ramping up spending to
what has been perceived as unsustainable levels to offset the
pandemic's economic impact.
"The gradual economic recovery continued in February, but
the resurgence of the pandemic in March has reversed that trend.
Activity data for retail sales and the services sector showed
some resiliency in February, but there is little doubt that this
trend was reversed by the virus resurgence in March," analysts
at TS Lombard wrote in a note.
They also expect the Brazilian central bank to hike interest
rates steeply in the first half of the year - a move which could
support the real.
Latin American stocks retreated in early trade, with the
MSCI's index of regional stocks coming off a
two-month high.
Key Latin American stock indexes and currencies:
Latest Daily % change
MSCI Emerging Markets 1348.61 0
MSCI LatAm 2403.67 -0.29
Brazil Bovespa 120681.41 -0.21
Mexico IPC 48012.03 -0.13
Chile IPSA 4951.60 -0.38
Argentina MerVal - -
Colombia COLCAP 1306.43 -0.47 Currencies Latest Daily % change
Brazil real 5.5316 0.39
Mexico peso 19.8200 -0.04
Chile peso 695.7 0.68
Colombia peso 3621 0.12
Peru sol 3.6657 0.16
Argentina peso 92.9700 -0.04
(interbank)
(Reporting by Ambar Warrick in Bengaluru; editing by Jonathan
Oatis)
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