April 10 (Reuters) - Stocks and currencies across most Latin American countries rose on Friday and were set for strong weekly gains on expectations that upcoming talks between the U.S. and Iran could yield a more lasting solution to tensions in the Middle East.
For Peru and Hungary, the outcome of elections this weekend will set the tone for how investors perceive these markets.
Latam Advisors' Sebastián Maril said with Peru's economic stability, lower entry risk premium and strong credit ratings, the elections were unlikely to lead to major changes.
Copper producer Peru's sol slipped 0.5% to 3.4 per dollar. However, the currency was headed for its biggest weekly gain since October 2023 after the local central bank held its benchmark interest rate for the seventh straight time.
Local stocks dipped 0.5% and hard-currency bonds were marginally higher.
Peru's right-wing candidate Keiko Fujimori holds a narrow lead ahead of Sunday's presidential vote. But with over 30 candidates competing for the first round and no clear frontrunner, a runoff on June 7 is likely.
A right-leaning candidate could also potentially strengthen ties with Washington.
"You have the commodity complex that I think is going to be structurally interesting for years to come," said Jakob Ekholdt Christensen, senior emerging markets strategist at BankInvest. "The conflict in the Middle East is going to ignite a renewed interest in green transitioning and Peru stands in that regard as well positioned."
ASSETS BUOYED BY MIDEAST DE-ESCALATION
MSCI's index tracking Latin American stocks added 1.5% and was set for its strongest three-week performance since November 2020. The index hit its highest since October 2014.
A parallel currencies gauge edged up 1% to hit a record high.
The index was on track for its biggest weekly gain since February 2024 against the dollar on hopes that talks between Tehran and the United States on Saturday could yield a peace deal or a more long-lasting truce.
Benchmarks in Brazil and Chile led gains adding 1% and 0.8%, respectively, while the real firmed 1%.
Fitch maintained Mexico's sovereign rating at 'BBB-,' with a stable outlook. The peso strengthened 0.3% against the greenback while stocks were 0.5% lower.
The talks hosted by Pakistan are amid constrained oil supplies from the strategic Strait of Hormuz that have kept crude prices hovering near $100 a barrel. Brazil was the latest country to show that higher gasoline prices due to the U.S.-Israeli war on Iran were fueling inflation worries.
Meanwhile, Ecuador's government lifted tariffs on imports from its larger neighbor Colombia to 100% from a prior level of 50%, citing Colombia's alleged failure to implement border security measures.
Colombia's government will propose a 16 trillion peso tax reform to congress in coming days, Finance Minister German Avila said. With a new congress to be sworn in in late July, President Gustavo Petro's latest fiscal proposals have failed.
A more pivotal electoral event will be elections in Hungary on Sunday that are expected to vote out Viktor Orban as prime minister after a 16-year rule. The forint was up 0.2% at about 374 per euro, while stocks added 3.8%.
Most analysts are anticipating a rally across regional assets in the event that the center-right opposition party Tisza wins, although Ekholdt struck a more wary tone.
"We know that Orban has many tricks up his sleeve, so that makes us cautious."
Over the next week, the spotlight will be on the spring meetings at the International Monetary Fund.
Key Latin American stock indexes and currencies at 1954 GMT:
Stock indexes Latest Daily %
change
MSCI Emerging 1546.15 1.15
Markets
MSCI LatAm 3330.25 1.54
Brazil Bovespa 197141.02 1.03
Mexico IPC 69988.93 -0.46
Chile IPSA 11040.26 0.75
Argentina MerVal 3005840.87 0.21
Colombia COLCAP 2299.32 0.22
Currencies Latest Daily %
change
Brazil real 5.0089 0.96
Mexico peso 17.3123 0.28
Chile peso 895.23 -0.32
Colombia peso 3631.75 0.39
Peru sol 3.3897 -0.47
Argentina peso 1,370.0 0.94
(interbank)
Argentina peso 1,375.0 1.08
(parallel)
(Reporting by Johann M Cherian and Twesha Dikshit in Bengaluru; Editing by Andrea Ricci and Daniel Wallis)
By Johann M Cherian
