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Brazil says China to invest $4.78 billion as Lula visits Beijing

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Economists say Brazil's monetary tightening cycle is over

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Chile central bank seen holding rate at 5% next meeting, poll shows

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Indian, Pakistani assets soar after ceasefire

(Updates to mid-session trading)

By Nikhil Sharma, Johann M Cherian and Purvi Agarwal

May 12 (Reuters) - Most Latin American currencies slid against a stronger dollar on

Monday, after the United States and China reached a deal to temporarily trim their steep tariffs

on each other, while equities gained on surging commodity prices.

Following weekend talks in Geneva, the U.S. agreed to cut extra tariffs on Chinese imports

to 30% from 145%, while China would cut duties on U.S. imports to 10% from 125%. The new

measures are effective for 90 days.

The deal comes as a relief for global investors who have been on the edge ever since U.S.

President Donald Trump announced his sweeping levies on key trading partners, creating an

environment of high volatility and uncertainty.

The dollar index hit its highest since April 10, weighing on EM currencies. MSCI's

index of Latin American currencies was down 0.6%, set for its first loss in five

sessions.

"The U.S. is re-engaging with the world now through a kinder, gentler economic diplomacy

than it did before ... and yet, its view as a 'full faith and credit' counter-party won't return

soon," said Thierry Wizman, global FX & rates strategist at Macquarie.

"It will limit the dollar's gains, before it weakens again."

Chile's peso dipped 1.2%, the most among peers. A survey showed analysts expect the

central bank to leave benchmark interest rates unchanged in June.

Mexico's peso depreciated 0.7% after data showed industrial output fell 0.9% in March

from February, despite the government's expectations for this year.

The country's central bank is expected to cut its benchmark interest rate later this week.

Brazil's real weakened 0.5%. Focus was on President Luiz Inácio Lula da Silva's state

visit to Beijing, with Brazil announcing around 27 billion reais ($4.78 billion) of Chinese

investment into the country.

Vice President Geraldo Alckmin said he expects interest rates to fall sharply, pointing to a

stronger currency, and also echoing a survey of economists.

The trade deal between China and the U.S. boosted prices of base metals, uplifting

currencies in commodity exporter-heavy economies.

Colombia's peso was the only one higher against the dollar, as oil prices settled at

two-week highs.

Top energy companies in the region including Brazil's Petrobras jumped 3.3%.

Argentina's YPF gained 7.2% and Colombia's Ecopetrol climbed 1.2%.

Stock indexes in Argentina and Colombia were up 4.5% and 0.1%

respectively, while Brazil's Bovespa index was up 0.2%.

Miners including Brazil's Vale gained 2.7%, Mexico's Grupo Mexico SAB de CV

advanced 2.7% and U.S.-listed shares of SQM rose 3.6%, tracking higher

industrial metal prices.

The main stock index in Chile, the world's biggest copper producer, was up 1%.

Mexican stocks were up 0.3%.

"Sentiment with this new announcement is improving and that also implies that Latam markets

will be in a better shape or will be under less stress with these announcements of a pause of

tariffs towards China," said Andres Abadia, chief Latam economist at Pantheon Macroeconomics.

Stocks in the region have outperformed the broader MSCI EM stocks index so far

this year, as Latin American economies are among the countries with the smallest of Washington's

duties, and worries of a tariff-driven recession drove them to bargain-hunt outside the U.S.

China is also expected to host officials from other Latin American and Caribbean economies,

including Colombia and Chile.

Elsewhere, India's benchmarks and registered their biggest one-day rise in

more than four years, while Pakistani dollar bonds advanced and the local bourse saw its

steepest one-day jump since 1998 after the two nuclear powers agreed to a ceasefire over the

weekend.

Key Latin American stock indexes and currencies around 1920 GMT

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1160.51 1.94

MSCI LatAm 2222.41 -0.17

Brazil Bovespa 136786.05 0.2

Mexico IPC 56718.87 0.3

Chile IPSA 8311.9 0.96

Argentina Merval 2209166.7 4.483

6

Colombia COLCAP 1646.29 0.05

Currencies Latest Daily %

change

Brazil real 5.6825 -0.5

Mexico peso 19.5696 -0.7

Chile peso 946.03 -1.15

Colombia peso 4219.5 0.05

Peru sol 3.658 -0.16

Argentina peso (interbank) 1129 0.4428697

96

Argentina peso (parallel) 1150 2.1739130

43