EMERGING MARKETS-Latam FX, stocks poised for best week in months amid tariff speculation

Updates to mid-session trading

By Lisa Pauline Mattackal, Purvi Agarwal and Pranav Kashyap

Jan 17 (Reuters) - An index tracking Latin American stocks slipped on Friday, as traders were closely analyzing the potential impact of U.S. tariffs under the incoming administration of President-elect Donald Trump, who is set to be inaugurated next week.

MSCI's index tracking global emerging market currencies .MIEM00000CUS pared gains and last trading flat. It earlier rose after Trump said he had a good discussion with Chinese leader Xi Jinping on a number of issues, including trade and fentanyl.

In response to this news, most Latin American emerging market currencies reversed earlier losses and gained strength against the dollar.

Futures tracking China's Hang Seng Index HSIc1 jumped 1.2%.

The Mexican peso MXN= touched an over two-year low against the dollar, before reversing course to rise 0.56%. The stock index .MXX was up 0.44%.

The MSCI index tracking Latin American EM currencies .MILA00000CUS was down 0.3%. The index consisting of stocks .MILA00000PUS rose 0.3%. Both were set for their best weeks since September and August respectively.

This week, Latin American markets managed to recover some of their earlier declines. This rebound came after a U.S. inflation report reignited discussions about the possibility of multiple Federal Reserve rate cuts. This paused the rally in the dollar and Treasury yields, which have been putting pressure on emerging market assets.

Looking ahead to next week, attention will shift to the inauguration of Trump as U.S. president.

Among Latin American economies, Mexico is expected to be the most adversely affected by Trump's proposed tariffs. A Reuters poll of analysts indicated that Mexico's economy is likely to remain sluggish throughout the year.

"Moves in currency markets have for the most part remained relatively muted ahead of Donald Trump's inauguration next week. Next week may bring more volatility. Whether he delivers or disappoints, markets are likely to react," Jonas Goltermann. deputy chief markets economist at Capital Economics said.

In Brazil, President Luiz Inacio Lula da Silva promised to introduce a minimum tax on all income earned by wealthy individuals, in order to give tax relief to those earning under 5,000 reais ($824.72) per month, Finance Minister Fernando Haddad said.

The real BRL= slipped 0.14%, while its Bovespa stock index .BVSP gained 0.8%.

In a positive development for Argentina, the country reported its first trade surplus in over a decade in 2024, data showed, marking a win for President Javier Milei and his sweeping austerity push in his first full year in office.

Argentina's Merval index .MERV lost 4.1%, while its peso was flat.

The Colombian peso COP= pared early losses to trade flat. Data showed November retail sales rose 10.4% on an annual basis, while November industrial output slipped 0.8%.

The JP Morgan EMBI Global Index, which tracks emerging market bonds, rose about 1% from the week prior.

Highlights:

Bolivia in talks with Argentina to restart gas supply amid demand spike, executive says

Argentina's economy rebounding 'quite strongly,' growth to continue, IMF says

Brazil's IGP-10 price index rises 0.53 pct in Jan

European Union and Mexico re-ignite stalled upgrade to their free trade deal ahead of Trump's inauguration

Key Latin American stock indexes and currencies:

(Reporting by Purvi Agarwal, Lisa Mattackal and Pranav Kashyap in Bengaluru; Editing by Alistair Bell)

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