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LatAm stocks drop 0.7%, FX down 1.1%

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Indexes set for sharp weekly losses

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US stocks recover on growing Fed cut bets

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Mexican economy shrinks in third quarter

(Updates with afternoon trading)

By Nikhil Sharma and Sukriti Gupta

Nov 21 (Reuters) - Latin American assets were heading

for sharp weekly declines on Friday, as emerging markets

remained risk-averse even as uncertainty over U.S. Federal

Reserve policy and fears of a potential AI bubble eased.

A broader index for regional equities fell

0.7% on the day and remained on course for its biggest weekly

drop since early October, down 2.6%, reflecting subdued

sentiment in emerging markets globally even as U.S. markets

stabilized after a heavy sell-off in the previous session.

After an AI-led rout on Thursday, driven by concerns over a

potentially overvalued tech sector despite Nvidia's ( NVDA )

upbeat forecast, Wall Street investors added risk on Friday,

buoyed by growing bets on a December rate cut following remarks

from policymakers.

The dollar index was up 1% for the week, supported by

uncertainty after Thursday's U.S. jobs report - delayed because

of a government shutdown - painted a mixed picture of the labor

market.

MSCI's index tracking Latin American currencies

fell 1.1% and was on pace for its worst week

since early July.

Talking about the declines in Latam assets on the day,

Rachel Ziemba, founder of Ziemba Insights, said, "Latam markets

in a way are catching down to the weakness in global markets

earlier in the week" with many commodity prices, including oil

and metals, down as well.

The Brazilian real fell 1.3% and was set for its

first weekly decline in six, with a 1.9% drop, as a fall in

crude prices weighed.

The local stock index was down 0.4% on the day and

1.9% for the week, also on track for its first weekly loss in

six.

Brazil's government said that 22% of its exports to the U.S.

remain subject to a 40% extra tariff after U.S. President Donald

Trump expanded the list of exemptions to include goods such as

coffee, meat and fruit.

In Mexico, the peso fell 0.5% with data showing Latin

America's second-largest economy shrank by 0.3% in the third

quarter. The slowing economy has been the biggest reason behind

the central bank's decision to cut rates despite ongoing

concerns about core inflation.

The country's local equity index advanced 0.9%.

Separate data showed economic activity contracting 0.6% in

September from the previous month. Both the stock index and the

currency were heading for significant weekly losses.

Colombia's peso dropped 1%. The country's COLCAP

Index lost 0.2% after falling 1.5% on Thursday. Both

assets were headed for heavy weekly losses.

Chile's peso dropped 0.9%, taking its weekly losses

to 1.3%.

The Santiago stock index gained 0.3%, and was up

2.3% for the week after last Sunday's presidential vote, with

analysts seeing a potential victory for far-right candidate Jose

Antonio Kast in a December runoff, raising hopes that a

right-wing government would deliver more market-friendly

reforms.

Argentina's stock market was open but banks were closed and

the local peso did not trade on Friday.

Key Latin American stock indexes and currencies:

Equities Latest Daily %

change

MSCI Emerging Markets 1335.5 -2.63

MSCI LatAm 2612.38 -0.70

Brazil Bovespa 154844.47 -0.35

Mexico IPC 62250.28 0.94

Chile IPSA 9827.88 0.26

Argentina Merval 2763731.42 -3.045

Colombia COLCAP 2024.51 -0.23

Currencies Latest Daily %

change

Brazil real 5.4 -1.26

Mexico peso 18.4712 -0.5

Chile peso 936.75 -0.91

Colombia peso 3798.5 -1.04

Peru sol 3.385 -0.2

Argentina peso (interbank) 1424 -

Argentina peso (parallel) 1405 -7.82