EMERGING MARKETS-Argentine bonds rally on debt deal; Brazil's real outperforms Latam FX

By Ambar Warrick and Susan Mathew

Aug 4 (Reuters) - Brazil's real firmed on Tuesday, cheered by a rise in industrial output, while Argentine bonds rose after the country struck a deal to restructure $65 billion in sovereign debt.

After multiple deadline extensions, Argentina said it had reached a deal with three creditor groups, which potentially could help it climb out of a damaging default and revive the recession-hit economy. The country had slipped into its ninth sovereign default in May this year.

Argentina's Merval stock index .MERV, which had jumped 6.6% on Monday and almost 7% this session to scale a record high, reversed course to trade 0.7% lower. The peso ARS=RASL slipped marginally to hit new lows, while traders said Argentina's over the counter bonds RPLATC closed an average 8.7% higher.

"With the removal of this uncertainty and potential engagement with the International Monetary Fund, we think further upside is likely (for Argentine bonds) in the coming weeks," said Citigroup FX strategists.

However, "this near term rally (in local assets) would be an opportunity for investors to pare back on their peso positions, which have rallied meaningfully since April on the back of local exchanges, more regulatory changes, and a more favorable external environment," they said.

Brazil's real BRBY outperformed peers, up 0.3%. Data showed that industrial output in the country marked its second-biggest increase ever in June, as the sector continued to claw back from disruptions caused by the pandemic.

On Wednesday, the central bank is expected to cut interest rates to a record low 2% as it continues to try and mitigate the impact of the coronavirus.

The Mexican peso MXN= was at three week lows against a weaker dollar, and Colombia's currency COP= lost 0.5%, but both traded well off session lows as oil prices recovered on U.S. stimulus hopes. O/R

Among stocks, Brazil's Bovespa stock index .BVSP extended losses to a fourth straight session, pulled down by heavyweight lender Itau Unibanco Holding ITUB4.SA, after its quarterly profit plunged 40%.

Colombian oil major Ecopetrol ECO.CN rose almost 3% after it narrowly avoided a second-quarter loss expected by analysts. It reported a 99% decline in net profit due to the fall in global oil prices, and said it would invest up to $13 billion over the next three years.

Chilean stocks rose 0.1%. The country's central bank is likely to stay pat on its benchmark interest rate, through at least the next 12 months, a central bank poll of traders showed on Tuesday.

Key Latin American stock indexes and currencies at 1943 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1089.86

1.11

MSCI LatAm .MILA00000PUS

2006.28

-0.93

Brazil Bovespa .BVSP

101058.88

-1.72

Mexico IPC .MXX

37522.50

-0.06

Chile IPSA .SPIPSA

3950.75

0.11

Argentina MerVal .MERV

52132.51

-0.708

Colombia COLCAP .COLCAP

1129.40

-0.33

Currencies

Latest

Daily % change

Brazil real BRBY

5.2975

0.28

Mexico peso MXN=D2

22.7470

-0.54

Chile peso CLP=CL

771.2

-1.84

Colombia peso COP=

3779.45

-0.52

Peru sol PEN=PE

3.5508

-0.28

Argentina peso (interbank) ARS=RASL

72.5600

-0.06

(Reporting by Ambar Warrick in Bengaluru; Editing by Sandra Maler and Marguerita Choy)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))

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