EMERGING MARKETS-Stocks at 10 month high, Latam forex up vs USD

EMERGING MARKETS-Stocks at 10 month high, Latam forex up vs USD
* Emerging market stocks rise, touch fresh 10-month high * LatAm currencies gain on U.S. dollar after GDP data * Credit spreads widen as U.S. Treasury market rallies * Credit Suisse cuts Russian stocks to underweight By Daniel Bases NEW YORK, July 31 (Reuters) - Emerging market stocks rose
in quiet end-of-month trade on Friday as investors took to
heart a report showing U.S. economic activity contracted less
than expected in the second quarter. Latin American currencies rose against the U.S. dollar onposition squaring and a touch of increased risk appetite after
the better-than-expected U.S. second-quarter gross domestic
product data. "The GDP data still plays into a positive risk tone. I
don't think the market reacted negatively to that," said Flavia
Cattan-Naslausky, emerging markets currency strategist at RBS
Securities in Greenwich, Connecticut. "Currencies are slightly bid, but mostly I think this has
to do with squaring up into month-end. The market is, well,
very dead," she said. A healthier U.S. economy helps drive demand for goods and
services from lower-cost emerging markets. In the currency market, Brazil's real BRBY edged up 0.21
percent to 1.8710 per U.S. dollar. Mexico's peso MXNMEX01
rose 0.11 percent to 13.2250 per U.S. dollar. Higher commodity prices also favored emerging markets where
much of the raw materials are mined, drilled and shipped.
Copper touched a 10-month high and crude oil prices gained
$1.27 a barrel to $68.21 CLc1 with the help of the weaker
U.S. dollar. The North American trading session kicked off with a report
showing the U.S. economy contracted at a 1.0 percent rate in
the second quarter. Analysts polled by Reuters had forecast GDP
falling at a 1.5 percent rate. However, the data also showed a drop in consumer spending
of 1.2 percent, after a rise of 0.6 percent in the first
quarter. The drop in spending is a concern for Mexico, which
sells 80 percent of its exports to the United States. The consumer data did help lead to a run-up in U.S.
Treasuries, causing the spread over emerging market sovereign
bonds to widen even though those credits were little changed on
the day. The benchmark JP Morgan Emerging Markets Bond Index Plus
11EMJ.JPMEMBIPLUS showed yield spreads wider by 11 basis
points, to 397 basis points. Investors appear to be holding firm to the recent rally in
asset prices, even as its intensity tapers. MSCI's emerging markets stock index gained 1.6 percent
.MSCIEF while the Latin American stock index rose 1.4 percent
.MILA00000PUS. Funds-tracker EPFR Global said investors poured $9.5
billion into equity funds around the world this week, the
highest weekly inflow since June 2008. [ID:nHKG97502] Russia's benchmark RTS stock index is up 21 percent
in the last 18 days from its recent low, while up 61 percent
for the year to date. Credit Suisse downgraded Russia to a 5 percent underweight
stance from a 5 percent overweight in its model portfolio on
Friday, according to a report it sent clients.