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Brazil's stock benchmark on track for monthly gain

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Argentine equities gain sharply, peso extends losses

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Analysts warn of complex backdrop ahead

By Niket Nishant

Oct 31 (Reuters) - Latin American stocks and currencies were set to eke out slim gains for the month on Friday as post-election optimism in Argentina and progress on U.S.-China trade talks tempered concerns over tariff tensions.

MSCI's index tracking regional stocks was up 0.2%, while an equivalent currencies gauge was flat. They were poised to end October with gains of 0.9% and 0.1%, respectively.

While long-term tailwinds, such as investor demand for diversification, have improved the region's prospects, October's price swings underscored Latin America's sensitivity to global economic shifts.

Investors could be confronted with a complex mix of challenges as they head into the final stretch of the year.

BRAZILIAN STOCKS GAIN, MEXICAN FX COOLS

In Brazil, the Bovespa index climbed 0.3% and was on track for its third straight monthly gain. Data released on Friday showed the country ended the third quarter with an unemployment rate of 5.6%, the lowest in history.

Investors also took heart from a slew of earnings reports, including from metal and mining company Vale, whose shares rose 1.6%.

Still, problems at Brazil's Braskem raised concerns about the health of the petrochemical industry. J.P. Morgan, meanwhile, raised its 2025 forecast for defaults on emerging-market high-yield corporate bonds.

Mexican equities were flat after hitting record highs on Wednesday, while the peso weakened against the dollar for the fourth straight day, falling 0.3%.

Argentine stocks gained 3.1%, gearing up for one of their best months on record. The peso was flat.

"Political risks have already eased with the midterm election, but that doesn't mean that economic risks are gone. The peso is still overvalued," said Mauricio Monge, senior economist at Oxford Economics.

"It's unclear what's going to happen with the peso. But the government will have the ammunition required to address this overvaluation without a strong pass-through to inflation."

The country is planning to marginally loosen the share of reserve requirements that commercial banks must report daily, aiming to revive lending and boost liquidity, Bloomberg News reported on Thursday, citing a person familiar with the matter.

Chilean stocks were up 1.1% and the peso gained 0.1%.

Direct production costs at Chile's large copper mines fell in the first half of the year, the state-run Chilean Copper Commission said on Thursday, marking a reversal of the upward trend of recent years. The country is the largest producer of the red metal.

Separately, Morgan Stanley wrote in a note that emerging market governments have raised $5.1 billion through bond sales this week, pushing total issuance for the year to $239.8 billion, already surpassing any previous full-year record.

Key Latin American stock indexes and currencies:

Equities

Latest Daily %

change

MSCI Emerging Markets 1401.03 -0.75

MSCI LatAm 2574.97 0.20

Brazil Bovespa 149193.02 0.28

Mexico IPC 62938.47 0.08

Chile IPSA 9428.89 1.1

Argentina Merval 2878735.24 3.05

Colombia COLCAP 1988.96 -0.09

Currencies

Latest Daily %

change

Brazil real 5.3856 -0.09

Mexico peso 18.5744 -0.28

Chile peso 941.56 0.07

Colombia peso 3855.95 -0.09

Peru sol 3.3806 0.01

Argentina peso (interbank) 1442 -0.07

Argentina peso (parallel) 1435 1.74