EMERGING MARKETS-Most Latam markets retreat; Israeli stocks, FX jump

Updates to mid-session trading

By Purvi Agarwal and Johann M Cherian

Feb 5 (Reuters) - Most Latin American stocks and currencies fell on Wednesday, retreating after gaining ground in the previous session, as investors assessed U.S. President Donald Trump's policies that have created an uncertain outlook for emerging markets this year.

MSCI's index tracking Latin American currencies .MILA00000CUS declined 0.5% and was set to snap its six-session winning streak.

Meanwhile, Israel's shekel IRS= rose 0.6% against the dollar while the TA-125 index .TA125 jumped 1.6%, set for its biggest one-day rise in more than two months.

Trump said the U.S. would take over war-ravaged Gaza and create a "Riviera of the Middle East" after resettling Palestinians elsewhere, drawing regional condemnation.

Brazilian President Luiz Inacio Lula da Silva rejected the Gaza proposal, dismissing Trump's expansionist ambitions and tariff threats against trading partners.

Steep losses in oil prices also weighed on the currencies of Latin America's oil producers such as Mexico's peso MXN= that depreciated 0.3% and Colombia's peso COL= which slipped 0.3%. O/R]

Ahead of a monetary policy decision by Mexico's central bank due on Thursday, a Reuters poll showed economists expect the institution to cut benchmark interest rates by 50 basis points, taking it to 9.50%.

The Brazilian real BRL= weakened 0.6%, set to break its longest winning streak against the dollar in 20 years, if losses hold through the day.

Data showed industrial production in Brazil expanded in 2024, but a third consecutive monthly drop in December reinforced signs of an economic slowdown, helping the central bank's stance that cooling economic activity was crucial for bringing inflation to target.

"The industrial sector is expected to continue to find support in significant fiscal transfers to households, the expanding real wage bill of the economy, and aggressive government-sponsored industrial policies, but to face headwinds from tighter monetary and financial conditions," Goldman Sachs analysts said in a note.

Trump's tariff policies have caused havoc for emerging market economies as their assets become more volatile and less appealing against safe haven U.S. assets.

Latin American markets had rebounded on Tuesday as investors took advantage of the relief brought by Trump pausing tariffs on U.S. neighbors for a month, but the ongoing U.S.-China trade war kept concerns firmly on the table.

The only outlier was the Chilean peso CLP= that inched up 0.1% against the dollar tracking higher copper prices.

A rally in regional stock markets also lost some steam, with a stocks gauge .MILA00000PUS down 0.3%.

Colombia's COLCAP .COLCAP lost 0.6% weighed down by Ecopetrol ECO.CN that shed 2.4% after the country's President Gustavo Petro called for the energy conglomerate to sell its U.S. fracking business.

Argentina's Merval .MERV fell 1.6% and Meixcan equities .MXX dropped 0.3%, on the otherhand Brazil's Bovespa .BVSP added 0.3%.

Elsewhere, Ukraine's GDP-linked warrants rallied between 2-3 cents XS1303929894=TE, XS2895057334=TE after Ukraine and Russia said they were in touch with U.S. President Donald Trump's administration.

The rouble touched its strongest level in four months against China's yuan CNYRUB=, and was set for its best day since December versus the dollar.

Key Latin American stock indexes and currencies at 1930 GMT: