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Latam stocks, FX up 0.4% each

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Both indexes set for weekly gains

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Petrobras set for biggest weekly drop in over six months

(Updated at 1937 GMT)

By Shashwat Chauhan and Johann M Cherian

May 17 (Reuters) - Chile's peso outpaced currencies in

Latin America on Friday, setting it up for its biggest weekly

jump in nearly seven months, while yield on Mexican government

bonds and the peso ticked up after a local policymaker ruled out

a June rate cut.

World's largest copper producer Chile's peso

strengthened 0.7%, as copper prices surged to multi-month highs

after top-metals consumer

China announced a stimulus package

for its ailing property sector.

"Countries like Chile are seeing their currencies and

their economies get back on green territory, and it has to do

with commodities going up on this global recovery narrative,"

said Juan G. Perez, director of trading at Monex USA.

"It has also been aided with the rescue package being

put together by China."

Mexico's peso climbed 0.4%, on course for its

third consecutive week in gains, while yield on the benchmark 10

year sovereign bond ticked up to 9.6% after Banxico

deputy governor said she

does not foresee a cut

to the benchmark interest rate in June, according to a

report.

The peso has outperformed regional peers year-to-date as

Banxico held back from further rate reductions after March,

given fears of inflation pressures flaring up and as the U.S.

Federal Reserve delays its monetary easing cycle.

MSCI's Latam currencies index ticked up

0.4% against the dollar and was set for a weekly rise of 1%.

Brazil's real appreciated 0.5% as prices of iron ore,

one of the country's top exports, jumped to a one-week high.

Local central bank chief Roberto Campos Neto said he cannot

anticipate future interest rate cuts in the country, after the

monetary authority earlier this month voted to slow the pace of

its easing cycle citing local and global uncertainties.

On the equities front, MSCI's gauge for stocks

gained 0.4%, on course for a weekly gain of

0.6%.

Brazil's Bovespa was flat with Petrobras

dropping after the oil firm sacked 20 employees who worked

closely with the former CEO, who was let go earlier in the week.

The stock has lost over 11% in this week alone and is poised for

its biggest weekly drop in nearly seven months.

Energy firms 3R Petroleum and Enauta

said they had reached an agreement to merge in an all-stock

deal. 3R's shares rose over 6%, and Enuata was last up close to

2.5%.

Mexico's main index added 0.3%, underpinned by gains

in miners Penoles and Grupo Mexico.

Elsewhere, citizens in the Dominican Republic's geared

up for the first round of presidential elections on Sunday.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1100.27 0.16

MSCI LatAm 2503.78 0.41

Brazil Bovespa 128182.68 -0.08

Mexico IPC 57648.80 0.32

Chile IPSA 6655.21 0.06

Argentina MerVal 1467939.08 -0.905

Colombia COLCAP 1426.30 0.62

Currencies Latest Daily %

change

Brazil real 5.1026 0.53

Mexico peso 16.6036 0.40

Chile peso 891.2 0.70

Colombia peso 3831.75 -0.20

Peru sol 3.7268 -0.19

Argentina peso 886.5000 0.00

(interbank)

Argentina peso 1100 0.00

(parallel)