Latin American stocks rose to a six-month high on Friday on strong jobs data in the United States and a surge in volume suggested investors are betting on further gains ahead. The MSCI Latin American stock index rose for a fourth straight day to its highest level since August, adding 0.94 percent and clocking a 3.9 percent gain on the week.
Volume in Brazil and Mexico jumped to its highest in two months this week as foreign investors piled back into higher-risk assets due to easing fears about Europe's debt crisis, improving economic data and expectations of low US interest rates for years to come.
"The flow of good news has continued in February, and the market retained that optimism with the US jobs data," said Pedro Galdi, an analyst with SLW Corretora in Sao Paulo. "With interest rates expected to be low for a long time, people will look to emerging markets such as Brazil for returns." Shares snapped back from early losses after the US Labour Department released data showing the US unemployment rate fell to a near three-year low in January.
A recovery in the US economy could help support global growth, spurring demand for Latin American commodities exports such as iron ore, oil, copper and soy. Despite the improvement, benchmark US interest rates are seen hovering near zero through the end of 2014 after statements from the Federal Reserve last week.
Brazil's benchmark Bovespa stock index touched a fresh eight-month high, gaining 0.97 percent to 65,217.37 points. The index, which climbed above its 200-day simple moving average last month, notched its fifth week of gains in a row with a 3.7 percent gain in the last five sessions.
A steady campaign of interest rate cuts by the country's central bank is expected to drag Brazil's key rate into the single digits in the coming month, which should help the economy and boost corporate profits. The Bovespa has gained nearly 15 percent this year, rebounding from last year's 18 percent loss as foreign investors poured in an additional 7.2 billion reais ($4.18 billion) in January, the biggest monthly inflow since Brazil adopted the real in July 1994.
"Investors are taking advantage of the fact that there's no bad news lately, but if the situation turns and something unexpected happens abroad, people are going to flee, and it could be ugly," Galdi said. PDG Realty, Brazil's biggest homebuilder, added 3.6 percent while Fibria, the world's largest producer of eucalyptus pulp, added 4.5 percent.
In Mexico, the benchmark IPC index extended its three-day rally, rising 1.01 percent after breaking through a key resistance level that had previously tripped up further gains. "This is a psychological watershed, many people now think we can surpass the record high (set) at the beginning of last year," said Carlos Ponce, head of stock analysis at brokerage Ve Por Mas in Mexico City. Telecommunications firm America Movil drove gains in the index, adding 2.2 percent, while cement producer Cemex rose 3.9 percent.
Data on Friday showed Mexican consumer confidence rose in January by the most in over a year. Chile's IPSA index edged higher for a fourth day, rising 1.01 percent to cap a 3.7 percent weekly gain, its best in two months. Industrial conglomerate Copec rose 2.3 percent, while Bottler Embotelladora Andina rose 5.3 percent after it said late Thursday it would merge with soft drinks distributor Coca Cola Polar.