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Poll suggests Brazil's economy will grow at steady pace

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Mexican economy grows 1.6% on an annual basis in May

(Updated at 3:30 p.m. ET/ 1930 GMT)

By Johann M Cherian and Shashwat Chauhan

July 22 (Reuters) - Brazil's and Mexico's currencies led

gains in Latin America on Monday, rebounding from the previous

week's sell-off, as investors assessed the implications of U.S.

President Joe Biden's decision not to seek re-election.

Brazil's real appreciated 0.4%, after logging its

steepest weekly loss since November 2022 on Friday. A poll

showed the region's biggest economy will continue growing at a

steady pace over the medium term thanks to a continuous rise in

public spending that is set to keep fiscal deficits

uncomfortably high.

Brazil's government also widened its primary deficit

forecast for this year to 32.6 billion reais ($5.9 billion), up

from 14.5 billion reais projected in May.

"The fiscal issue remains a point of special concern for

traders, fueling volatility for the exchange rate and assets of

the Brazilian economy," StoneX analysts wrote in a note.

Mexico's peso recovered 0.6% after notching its

biggest weekly drop since early June in the previous session.

Data showed the region's second-largest economy grew 1.6% in May

on an annual basis, compared with a revised 5.3% growth seen the

month before.

Global shares also nudged higher after Biden's decision to

bow out of the election race and endorse Vice President Kamala

Harris injected a degree of optimism into the markets.

Biden's rival, Republican candidate Donald Trump is seen as

a negative for Latin American economies, most of which are led

by left-leaning governments. Mexico is considered to be

particularly exposed, given the former U.S. president's policies

on trade, immigration and security.

On Friday, MSCI's index tracking Latin American currencies

logged its biggest weekly drop since early June

after an assassination attempt on Trump boosted expectations

that he might win a second term at the White House.

Meanwhile, currencies of copper producer Chile

reversed initial losses and last up 0.4%, while Peru's sol

was an outlier, down 0.5%.

Attention will also be on a Group of 20 finance ministers

and central bank governors meeting in Brazil later in the week.

On the equities front, an index tracking regional bourses

was subdued, while Brazil's Bovespa

edged up 0.2%

Markets were on the cusp of corporate earnings season in

Brazil, with the release of reports from Carrefour

due after the closing bell, while those from Santander

and Vale were also on tap.

Mexico's main index climbed 0.3%, while Argentina's

benchmark gained 0.9%

Key Latin American stock indexes and currencies:

Latest Daily % change

MSCI Emerging Markets 1085.64 -0.36

MSCI LatAm 2258.49 0.02

Brazil Bovespa 127850.87 0.18

Mexico IPC 53831.83 0.29

Chile IPSA 6588.89 0.46

Argentina MerVal 1582802.46 0.878

Colombia COLCAP 1368.58 0.07

Currencies Latest Daily % change

Brazil real 5.5729 0.55

Mexico peso 17.9266 0.60

Chile peso 942 0.52

Colombia peso 3992.67 1.09

Peru sol 3.7548 -0.48

Argentina peso 925.5000 -0.05

(interbank)

Argentina peso 1420 1.76

(parallel)