EMERGING MARKETS- Latam stocks, FX jump as Fed fears ease, commodities rise

* Brazilian airline Gol reports Q2 net loss; shares down * Argentina president sacks economy chief after less than a month * Recession lurks as U.S. economy contracts again in Q2 By Anisha Sircar July 28 (Reuters) – Latin American stocks and currencies posted solid gains on Thursday amid a global risk rally sparked by hopes of a possible slowdown in the pace of U.S. interest rate hikes, with a boost in key commodities lending support to the resource-heavy region. Stocks jumped 1.7%, while currencies added 1.5%. The U.S. central bank delivered another 75 basis-point rate increase on Wednesday, but comments by Federal Reserve Chairman Jerome Powell led to hopes of smaller increases in the future, as well as an embracing of riskier assets. Also aiding sentiment, the Financial Times reported that top metals consumer China will issue 1 trillion yuan ($148.2 billion) in loans for stalled property developments. “Chinese stimulus may gather pace in the coming months and support EM growth, especially in Latam,” said Regis Chatellier, director of EM strategy at Oxford Economics. “Inflation and policy rates in Latam countries will have peaked by next year, which should give policy room to support economic growth.” Prices of commodities including copper, oil and iron ore rose as the dollar eased from a recent surge and amid a broad risk-on mood. Brazil’s real, Mexico’s peso and Colombia’s peso jumped between 0.2% and 1%. So far in July, given Thursday’s gains, Latam stocks are up 1.9% on the month, while currencies have ticked up 0.5%, with Brazil’s real leading gains. Against a backdrop of rising inflation, aggressive central bank tightening moves and China’s economic strains, analysts say lower market volatility and easing pressure on the dollar are among the largest preconditions for a sustained rally to materialise in Latam, as it did earlier this year. Global recession fears prevailed after data showed the U.S. economy unexpectedly contracted in the second quarter, fanning fears that the economy was already in recession. Among earnings reports, Brazilian pulp maker Suzano SA fell 1% after posting a 98% plunge in second-quarter net income, hit mainly by exchange rate depreciation, the firm said. Airline Gol Linhas Aereas Inteligentes SA plummeted 6% after reporting a quarterly net loss of 2.85 billion reais ($544 million) versus a profit of 658 million a year earlier. Elsewhere in the region, Argentina’s president will fire Economy Minister Silvina Batakis after just a few weeks on the job, Clarin newspaper reported citing official sources, as the country struggles with an economic crisis. Meanwhile, global ratings agency S&P revised Pakistan’s outlook to “negative” from “stable”, citing risks from higher commodity prices and the country’s weakening currency. Key Latin American stock indexes and currencies at 1453 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 995.88 0.61 MSCI LatAm 2082.91 1.7 Brazil Bovespa 101259.67 -0.18 Mexico IPC 46942.31 0.21 Chile IPSA 5252.97 0.03 Argentina MerVal 126578.01 0.171 Colombia COLCAP 1298.22 -0.15 Currencies Latest Daily % change Brazil real 5.2186 0.57 Mexico peso 20.3890 0.03 Chile peso 913.3 0.57 Colombia peso 4374.7 0.93 Peru sol 3.91 0.00 Argentina peso 131.1200 -0.16 (interbank) Argentina peso 320 1.88 (parallel) (Reporting by Anisha Sircar in Bengaluru; Editing by Hugh Lawson)

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