Latam currencies, stocks surge on trade relief

A global rally in equities spilled over to Latin America on Monday after the United States and China agreed to restart trade negotiations, helping Brazil's main stock index extend a stellar second-quarter performance.

Sao Paulo-listed shares which logged its biggest quarterly percentage gain in a decade on Friday, jumped another 1%, while the real firmed nearly 1% to trade at 3.8148 per dollar.

The buying came as US President Donald Trump offered concessions to China at the G20 summit in Osaka, Japan over the weekend, including holding off on new tariffs and easing of restrictions on tech company Huawei.

Fears that a drawn-out trade dispute between the United States and China will hit global growth have spurred bouts of selling this year, with emerging market stocks posting their worst monthly performance this year in May.

However stocks have recovered on hopes major central bank would tilt toward monetary policy easing to stir growth, while the temporary trade truce helped risk appetite.

"Consistent with the market's base-case expectations, any further tariffs on goods have been put on hold for now," Citi analysts wrote in a note. "We expect the unwinding of hedges against bearish G20 risks to help EM FX."

Further brightening mood, factory data showed Brazil avoided slipping into contraction in June, with the IHS Markit purchasing managers index of manufacturing activity rising to 51.0 from 50.2 the month before.

Investors were also watching for signs of progress on the country's pension reform bill, which is expected to go through a vote in the congressional committee this week.

The Mexican peso firmed 0.84%, while the Chilean peso gained slightly. The MSCI's index of Latin American stocks jumped 1.25%, touching its highest level since March 20.

The Argentine peso was boosted by the country's central bank move to set a new lower interest rate floor on its benchmark "Leliq" notes at 58% for July.

The South American nation has had to hike interest rates to stem a slide in the peso currency since last year, though the rate, set by daily auctions of short-term Leliq notes, has been coming down steadily over the past few months.