*

MSCI Latam stocks index up 1%, FX 1.5%

*

Brokerages lower rating on EM stocks, FX

*

Mexico continues dialogue with US, Sheinbaum says

*

Argentina, Sri Lanka sovereign bonds slide further

(Updates through late afternoon trade)

By Johann M Cherian and Lisa Pauline Mattackal

April 3 (Reuters) -

Currencies in Latin America rose, while most stock indexes

in the region bucked a global equity selloff on Thursday on

relief that the region was spared from the worst of U.S.

President Donald Trump's reciprocal tariffs.

The U.S. imposed a universal 10% tariff on all imports

along with separate duties on individual economies. However

individual levies were more severe on Asian economies, while

Mexico

and Canada were left off the list of global tariffs.

MSCI's Latam currencies index rose 1.5%

to hit a 10-month high as the dollar slumped.

Mexico's peso led regional gains, strengthening 1.4% to

19.91 per dollar and on pace for its best day in two months,

while its benchmark stock index rose 0.5%.

A gauge of regional stocks advanced 1%,

despite a slump in other global equity markets as investors

rushed for safe havens such as government bonds.

Exemptions for Mexico, and less stringent levies on

other regional economies were welcome news after significant

volatility over the past few months, as Trump imposed and then

suspended tariffs on imports from Mexico and Canada.

Still, sharp uncertainty remains over the impacts of the

levies and on broader

emerging markets

, particularly on Asian economies.

"In relative terms Mexico's external competitiveness was

not hurt ... versus the current tariff baseline, but indirectly

Mexico and LatAm could be impacted by the potential impact on

U.S. and global growth of the broad 'reciprocal' tariffs and any

eventual retaliatory measures," analysts at Goldman Sachs said.

J.P. Morgan downgraded its recommendation for emerging

market currencies to "underweight", saying U.S. tariffs exceeded

its worst-case scenario, while Scotiabank lowered its rating on

emerging markets equities to "underweight."

Mexico's president, Claudia Sheinbaum, said her country

will move to strengthen local auto, steel and aluminum

industries which still face tariffs as high as 25%.

Brazil's

real touched its highest since October against the

dollar, and was last up 0.6% after Trump imposed only a 10% levy

on its exports.

However, sharp losses in oil prices weighed on the

region's energy stocks. Argentina's YPF dropped 4.2%,

Colombia's Ecopetrol fell 3.9% and Brazil's Petrobras

lost 3.2%.

Argentina's stock market fell 3.4%, and bonds also lost

ground. An index tracking risk premium for holding the country's

debt climbed 50 units to 867 basis points, while the dollar

bonds maturing in 2038 and 2041

dropped over 1 cent on the dollar.

Fitch cut China's long-term foreign currency recommendation

to "A" from "A+". The country is assigned a combined tariff rate

of 54%.

Elsewhere, Sri Lanka's sovereign dollar bonds

extended declines, with most maturities down

over 3 cents on the dollar according to Tradeweb data, in the

face of 44% U.S. tariffs.

The probability for sovereign defaults in low-income,

developing market economies is likely to increase due to U.S.

tariffs, Wells Fargo analysts said.

Key Latin American stock indexes and currencies at 2015 GMT:

MSCI Emerging Markets 1104.17 -0.68

MSCI LatAm 2119.65 1.02

Brazil Bovespa 131093.17 -0.07

Mexico IPC 54073.42 0.51

Argentina Merval 2275658.7 -3.432

8

Chile IPSA 7719.22 0.27

Colombia COLCAP 1657.4 0.24

Brazil real 5.627 0.6

Mexico peso 19.9185 1.4

Chile peso 949.33 0.57

Colombia peso 4158.51 -0.14

Peru sol 3.667 0.08

Argentina peso (interbank) 1074.25 -0.14

Argentina peso (parallel) 1290 1.94