(Updates to mid-session trading)

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Emerging market nations, firms issue bonds topping $55 billion

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Brazil's Guillen says fiscal outlook needs attention

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MSCI Latin American currencies gain 0.25%, stocks up 0.41%

By Purvi Agarwal, Pranav Kashyap

Jan 13 (Reuters) - MSCI's index tracking Latin American currencies and stocks edged higher in choppy trading on Monday as investors assessed developments in the region and expectations of interest rate cuts from the U.S. Federal Reserve after a strong jobs report.

The MSCI index of Latin American currencies ticked up 0.25%. However, gains were tempered by a rising U.S. dollar, which continued to gain for a fifth straight session, fueled by data on Friday that showed surprisingly strong U.S. job growth and a drop in unemployment.

This scenario has prompted investors to reassess riskier emerging market assets, particularly as the U.S. 10-year Treasury yield

approached the 5% mark

.

Mexico's peso got some respite after Mexican President Claudia Sheinbaum

unveiled her roadmap

to elevate Latin America's second-largest economy into the ranks of the world's top economies. The peso was last trading flat against the dollar.

Sheinbaum's plan focuses on enhancing local manufacturing, reducing imports, creating jobs, and streamlining regulations to attract investment. Mexico's benchmark equities index rose 0.3%.

However, the specter of trade-related tariffs under the incoming Trump administration casts a shadow over those aspirations.

"Ms. Sheinbaum's announcement of the plan ... has given a boost to the Mexican peso," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

However, the uncertainty tied to President-elect Donald Trump's second term in the White House is "putting a leash on any good performance that can be driven by this kind" of announcement, Abadia added.

In Argentina, the peso lost 0.4%, while the Merval index fell 4.84%, after gaining 2.8% last week and 172.5% in 2024.

Meanwhile, the Chilean peso edged up 0.28%, while its benchmark equities index lost 0.8%.

Across the region, emerging markets have been grappling with pressure from persistent U.S. inflation and economic robustness, leading to a reevaluation of potential Fed rate cuts.

Trump's threat to impose tariffs on imports has particularly affected Latin America, most notably the Mexican peso, after his victory in the Nov. 5 U.S. election.

"The outlook at the moment is very challenging, as we have rising U.S. yields, inflation concerns, tariff threats and also Chinese economic weakness," said Bernd Berg, a strategist at InTouch Capital Markets.

Emerging market countries and companies have issued bonds topping $55 billion, the most in years, as borrowers rush to lock in cash ahead of the potential tumult of the Trump administration.

The Brazilian real reversed early losses and was trading 0.16% higher in volatile trade.

Diogo Guillen, the Brazilian central bank's economic policy director,

emphasized the importance

of monitoring the fiscal outlook, even as the central bank affirmed plans for two more 100-basis-point rate hikes.

Brazil's upcoming fiscal spending cut package is set to be a pivotal story in early 2025, with close attention on inflation trends.

The MSCI index tracking Latin American stocks was up 0.41%, as oil companies gained on rising crude prices.

HIGHLIGHTS

** Argentina markets look to rate cut, crawling peg to add fuel to New Year rally

** China, India seek new supplies as US sanctions tighten grip on Russian oil

** Israel 2025 budget deficit could breach target and hit 5% of GDP, official says

Key Latin American stock indexes and currencies:-

Equities

Latest Daily % change

MSCI Emerging 1039.58 -1.66

Markets

MSCI LatAm 1868.98 0.41

Brazil Bovespa 118999.96 0.12

Mexico IPC 49743.31 0.3

Chile IPSA 6756.47 -0.85

Argentina MerVal 2669310.49 -4.84

Colombia COLCAP 1400.8 -0.29

Currencies Latest Daily % change

Brazil real 6.0955 0.16

Mexico peso 20.687 0.08

Chile peso 1007.4 0.28

Colombia peso 4304.5 0.88

Peru sol 3.779 -0.21

Argentina peso 1,039.0 -0.19

(interbank)

Argentina peso 1,230.0 -0.41

(parallel)