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Latam FX up 1.1%, stocks up 2%

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Brazil's Oct services activity up 1.1%

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Banxico touts stability of country's financial system

(Updates to afternoon trading)

By Pranav Kashyap and Johann M Cherian

Dec 11 (Reuters) - Brazil's real led gains among Latin

American currencies on Wednesday as investors priced in an

interest rate hike by the local central bank, while Argentine

stocks surged after data showed inflation hit a four-year low.

Brazil's real appreciated 1.4% against the U.S.

dollar, and touched a near two-week high after data showed

services activity in the country grew more than expected in

October, further building the case for interest rate hikes.

Economists polled by Reuters expect the local central bank

to announce an interest rate hike by 75 basis points to 12% at

1630 ET as inflation pressures prevail.

"Accelerating inflation and the weak real mean a bold rate

increase is on the cards today," Societe Generale analysts in a

note.

"A bigger stability hike cannot be ruled out as the central

bank tries to get ahead of the curve and support the real" they

added.

Separately, it's still unclear if the fiscal measures could

be approved by Congress this year, with the speaker of the lower

house saying the government does not have enough votes to pass

them.

Brazil's benchmark stock index also added 1.3% to

hit a more than one-month high aided by financial stocks.

Markets also monitored developments around President Luiz

Inacio Lula da Silva's health as a report said the leader was

expected to undergo a new medical procedure on Thursday.

More broadly, MSCI's index for Latin American currencies

added 1.1%, with the Mexican peso edging

up 0.2%.

In a biannual financial stability report Banxico said the

country's financial system maintains a solid and resilient

position despite global and domestic risks and the "notable

weakness" of the economy.

Markets weighed President-elect Donald Trump's pick for U.S.

ambassador to Mexico - former U.S. ambassador to El Salvador

Ronald Johnson.

Also aiding currencies of Mexico and Colombia, that

are oil exporters, were higher crude prices after the European

Union agreed to an additional round of sanctions threatening

Russian oil flows.

On the equities front, an index tracking local stocks

gained over 2%. Markets also priced in interest

rate cuts by the U.s. Federal Reserve next week after an in-line

U.s. inflation report.

Mexico's local stock index lost about 0.1%. The head

of stock exchange BIVA said, guidelines for a sweeping overhaul

of Mexico's stock market regulations should be set to go into

effect before the end of this year.

A Reuters report showed that Mexican firm Becle,

the largest tequila producer, is at risk from U.S.

President-elect Donald Trump's planned tariffs on the

country. The stock was up over 1% on the day.

Argentina's Merval index surged 4% after data showed

monthly inflation rate slowed to 2.4% in November.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1109.43 -0.21

MSCI LatAm 2063.3 2.24

Brazil Bovespa 129881.52 1.29

Mexico IPC 51308.78 -0.13

Chile IPSA 6731.67 0.17

Argentina Merval 2291149.2 4.084

5

Colombia COLCAP 1387.27 0.24

Currencies Latest Daily %

change

Brazil real 5.96 1.41

Mexico peso 20.0966 0.25

Chile peso 974.4 -0.2

Colombia peso 4339.56 0.64

Peru sol 3.726 -0.43

Argentina peso (interbank) 1016.5 flat

Argentina peso (parallel) 1060 0.93