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EMERGING MARKETS-Brazilian assets rise on pension prospects, U.S. Fed remarks

July 10 (Reuters) - Brazil's real and stocks rose on Wednesday due to government efforts to overhaul pension reform, while dovish remarks by U.S. Federal Reserve chief sparked a rally in riskier assets.

The real rose nearly 1% to as much 3.7595 per dollar, its highest level in over three months. The Colombian peso , Chilean peso and the Argentine peso all posted gains. Fed Chairman Jerome Powell said concerns about trade policy and a weak global economy “continue to weigh on the U.S. economic outlook” and reaffirmed the central bank stood ready to “act as appropriate” to sustain a decade-long expansion.

The comments reinforced expectations of an interest rate cut from the Fed for the first time in a decade at its monetary policy meeting later this month. Prospects of major central banks embracing looser monetary policy to counter a global growth slowdown has supported emerging markets this year. “There is now economic evidence that the outlook for the U.S. economy is not that great. Ultimately what that means is that the Federal Reserve will need to intervene, and they’re sounding dovish right now,” said Juan Perez, senior currency trader at Tempus Inc, Washington.

Brazilian markets, which were closed on Monday due to a holiday, were helped by optimism over the pension reform bill, with the lower house of Congress set to begin voting on Wednesday after it was pushed back a day due to political bargaining between the government and opposition lawmakers. Speaker Rodrigo Maia determines when a vote occurs but will only proceed when he is confident he has enough support in the house, which is comprised of representatives of more than 20 political parties.

The Bovespa rallied to a new record, surpassing the 105,000 level for the first time as sectors across the board gained. Mexican assets bucked the trend, with the peso falling 0.6%, adding to over 1% loss on Tuesday after the abrupt resignation of the country’s finance minister Carlos Urzua, who cited “extremism” in economic policy and conflicts of interest with other members of the government as reasons for leaving. Mexican President Andres Manuel Lopez Obrador, who appointed deputy finance minister Arturo Herrera to replace him, said Urzua had differences with the president’s chief of staff and businessman Alfonso Romo.

“We take yesterday’s surprise resignation to imply an erosion in Mexico’s fiscal orthodoxy that had been best represented by the fiscally responsible 2019 budget,” TD Securities strategist Sacha Tihanyi wrote in a note. “This opens the door to fiscal slippage in the 2020 budget, and crucially a lack of strong impetus to address the bubbling Pemex “crisis”, that we believe will lead to the second junk rating on the oil company within 6-12 months.”

Latin American stock indexes and currencies at 1919 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1052.22 0.94 MSCI LatAm 2962.89 1.42 Brazil Bovespa 105972.11 1.38 Mexico IPC 42987.54 0.39 Chile IPSA 5062.65 0.2 Argentina MerVal — – Colombia IGBC 12963.23 0.44 Currencies daily % change Latest Brazil real 3.7640 1.16 Mexico peso 19.2745 -0.62 Chile peso 684.75 0.65 Colombia peso 3210.50 0.19 Peru sol 3.2863 0.20 Argentina peso 41.6000 0.60 (interbank)

Reporting by Sruthi Shankar in Bengaluru
additional reporting by Richard Leong in New York; Editing by Susan Thomas

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