Latin American stocks, FX rise ahead of U.S. data, services data boosts Brazil's real

Latin American stocks and currencies broadly rose on Tuesday amid hopes softening U.S. inflation data that could lead to easing interest rates in the world's largest economy, while markets in Brazil jumped after services activity touched a record high in June.

Ahead of closely watched consumer price inflation data due Wednesday, U.S. producer prices increased less than expected in July which lifted hopes for a bigger interest rate cut at the Federal Reserve's September meeting.

MSCI's index of Latin American stocks (.MILA00000PUS) rose 0.2%, hovering at a three week high. Indexes of global emerging market stocks and currencies CBOE:EFS, (.MIEM00000CUS) gained about 0.2% each.

Meanwhile, Brazil's real USDBRL briefly touched a nearly one-month high against the dollar, and was last up about 0.3% after data showed the service sector rose 1.7% in June from the month prior, beating expectations for a 0.8% rise.

Brazil's central bank governor noted that the real had experienced "accelerated weakening," but said the central bank has managed to drive the disinflation process with minimal impact on economic activity.

The Bovespa index jumped 0.8% to its highest since January, led by gains in banking stocks Itau Unibanco ITUB3 and Banco Bradesco BBDC3. Itau Unibanco preferred shares touched an all-time high.

CSN Mineracao CMIN3 was the biggest gainer on the index, jumping over 7% after its second quarter results.

Among other Latin American bourses, Colombia's main index (.COLCAP) rose 0.4% and Mexican stocks jumped 0.7%.

Mexico's peso USDMXN gained 0.2% against the dollar after falling more than 1% in the previous session.

"Political developments are key risks to our constructive long-term Mexican peso outlook, however, we remain optimistic that worst case scenarios will be avoided and continue to believe the Mexican peso can recover over the long-term."

The dollar weakened against most Latin American currencies after the U.S. data. Colombia's peso USDCOP was up 0.2%, and Chile's peso rose 0.3% against the greenback.

Emerging market assets have steadily recovered from a steep selloff last week, with worries about a slowdown in the U.S. economy easing even as traders have increased bets on a 50 basis point rate cut at the Fed's next meeting.

The Japanese yen USDJPY has also weakened this week, helping high-yielding currencies such as the Mexican peso which were hit hard last Monday as crowded yen-funded carry trades unwound.

Chinese industrial output and retail sales data later in the week will be closely watched for clues on demand growth and the likelihood of government stimulus.

Elsewhere, the Russian rouble MOEX:USDRUB_SPT steadied against the dollar after tumbling as low as 96.395 earlier in the session, as Ukraine continued its biggest attack on Russian territory since the war began.

HIGHLIGHTS

** China new loans hit 15-year low in July, more policy steps expected

** Workers strike at world's largest copper mine in blow to BHP

Key Latin American stock indexes and currencies