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Brazil's central bank hikes rates by 100 basis points

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Preliminary data shows Mexico's economy shrank in fourth

quarter

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MSCI's Latin American currencies flat, stocks jump 2%

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Argentina's cenbank decision on tap

(Updates to midsession trading)

By Purvi Agarwal and Johann M Cherian

Jan 30 (Reuters) - Equity indexes in resources-rich

Latin America advanced on Thursday, with Brazil's Bovespa

hitting a more than one-month high as investors were relieved by

market-friendly comments from the country's president.

MSCI's index tracking Latin American stocks soared 2.7% to

hit levels not seen since early December.

Brazil's Bovespa jumped 2.6%, aided by technology stocks

after President Luiz Inacio Lula da Silva voiced support for

government non-interference in monetary policy a day after the

local central bank raised interest rates by 100 basis points

against a backdrop of worsening inflation. The real was

flat in choppy trading.

The president also said he would not interfere in the

pricing strategy of Petrobras, following which the state-run oil

giant added over 1.2%.

Investors also scrutinized data that showed the central

government met its 2024 primary budget target.

The real was among top underperformers among Latam economies

in 2024 and the local stock index had logged declines of more

than 10% on worries of fiscal dominance and central bank

interference by Lula.

"One real positive thing for markets that Lula said is that

he expressed support for the Central Bank governor and he wasn't

signaling that he's trying to undermine monetary policy," said

Rachel Ziemba, founder of Ziemba Insights.

"People are still quite worried about the fiscal stance in

Brazil and that is one of the particular challenges that will

probably keep the central bank hiking rates."

Meanwhile, Mexican stocks added 1.3% and the local peso

firmed 0.2% as markets assessed data that showed the economy

shrank more than expected in the fourth quarter, marking its

first quarter-on-quarter contraction in over three years.

Investors are on edge ahead of Feb. 1, the date that

President Donald Trump has said could mark the announcement of

tariffs on top U.S. trade partners Canada and Mexico.

Colombia's COLCAP equities index advanced 1.8%, with oil

firm Ecopetrol soaring 6.6%, tracking oil prices that edged

higher.

Colombia's peso firmed 0.3%, with investors focused

on the government's plans to pitch a new tax reform to Congress

to raise at least 12 trillion pesos ($2.86 billion) needed to

finance its budget.

Equity markets of copper exporters Chile and Peru added 1.9%

and 1.2%, respectively.

Argentina's Merval surged 2%, with local oil producer YPF up

0.7%. Traders and analysts expect the local central bank to

lower its benchmark interest rate as soon as Thursday by about

400 bps.

Meanwhile, El Salvador's Congress on Wednesday swiftly

approved a bill by President Nayib Bukele to amend its bitcoin

law to comply with a deal with the International Monetary Fund

to make acceptance of the cryptocurrency voluntary. Dollar bonds

edged up after the news.