EMERGING MARKETS-Israel's government bonds, shekel rise with Gaza ceasefire deal

Updates to mid-session trading

By Pranav Kashyap and Purvi Agarwal

Jan 15 (Reuters) - International government bonds issued by Israel, Egypt and Jordan rose on Wednesday following news of a phased deal to end the war in Gaza between Israel and Hamas, after 15 months of conflict.

The accord outlines a six-week initial ceasefire phase and includes the gradual withdrawal of Israeli forces from the Gaza Strip and release of hostages held by Hamas in exchange for Palestinian prisoners held by Israel.

The Israeli shekel ILS= rose 0.45% against the dollar, touching its highest level in nearly a month.

Israel's 2043 bond US4651387N91=TE rose more than 1 cent to trade at 82.417 cents while Jordan's 2047 bond US418097AJ07=TE jumped 1.9 cents to be bid at 89.76 cents, Tradeweb data showed. Egypt's 2059 bond XS2079846635=TE was also up just over 1 cent, last bid at 75.22 cents.

Israel's benchmark stock exchange .TA125 closed 1.26% higher.

In 2024, the Israel-Hamas conflict emerged as a significant flashpoint for global markets, particularly impacting the commodities sector.

The MSCI index tracking overall EM stocks .MSCIEF rose 0.3%.

"The geopolitical relief with Israel and Hamas, having a ceasefire coming just prior to Trump, who has been vocal about his support for Israel, is a positive thing for markets," said Juan Perez, director of trading at Monex USA. "You’re really going to see a more solid effect on equities there. The potential is on the upside."

In Latin America, the MSCI index tracking the region's currencies .MILA00000CUS rose 0.3%, hitting its highest level since Dec. 12. A stocks measure .MILA00000PUS jumped 2%, to its highest levels in nearly a month.

The dollar index =USD, which measures the greenback against six other major currencies, fell to its lowest level in a week, after a report showed core U.S. inflation rose less than expected in December, prompting traders to increase bets on the extent of interest rate cuts by the Federal Reserve this year.

Yields on U.S. Treasury notes, which soared after robust jobs data last week sparked a U.S. bonds sell-off, were lower across the board. Yields on the benchmark 10-year bond US10YT=RR dipped to a near one-week low. US/

Michigan Governor Gretchen Whitmer warned that proposed 25% tariffs on Mexican and Canadian imports could hurt the U.S. auto sector, raise vehicle prices and benefit China.

Mexico's peso MXN= gained 0.17%.

The Brazilian real BRL= rose to its highest level in over month after Brazil's central government significantly narrowed its primary budget deficit to 4.5 billion reais ($746.5 million) in November, data showed. The real was last up 0.6% while Brazilian stocks .BVSP gained 2%.

Additionally, statistics showed services activity in Brazil fell more than expected in November, in the latest sign of a cooling economy.

"You need an inflection here, either driven by weakening in the outlook in the U.S. or strengthening of growth outside of the U.S. If that were to happen, you could see the dollar weakening and that would be a very good environment for emerging market assets," said Lilian Chovin, head of asset allocation at UK private bank Coutts.

The Argentine peso was among the only major currencies that was flat to lower against the dollar. The South American country's central bank said it will slow the rate of the local peso's devaluation. The Merval stock exchange .MERV was down 1%.

Key Latin American stock indexes and currencies:

(Reporting by Pranav Kashyap and Purvi Agarwal in Bengaluru; editing by Barbara Lewis and Leslie Adler)

((Purvi.Agarwal@thomsonreuters.com;))