EMERGING MARKETS-Latam stocks slide on tariff concerns; Colombia cenbank holds rates

By Johann M Cherian and Lisa Pauline Mattackal

March 31 (Reuters) - Latin American stocks dropped on Monday though currencies were mixed as investors weighed the repercussions of extensive U.S. tariffs, while Colombia's peso firmed after the country's central bank kept rates steady.

U.S. President Donald Trump said reciprocal tariffs expected this week will include all nations, fueling concerns that the protectionist policies could spark inflation, dent demand and weaken global economic growth.

His remarks ahead of Wednesday's "Liberation Day," as Trump has described his April 2 announcement, contrasted with previous hints that the levies could be flexible.

MSCI's gauge for regional stocks .MILA00000PUS fell 0.7% to an over two-week low.

Highlighting the uncertainty faced by policymakers and investors alike, Colombia's central bank held its benchmark interest rate at 9.5% where most analysts expected a 25 basis point reduction.

Colombia's peso COP= strengthened after the decision, rising 0.6% against the dollar. Colombian stocks .COLCAP were flat.

Policymakers cited persistent inflationary pressures and "external uncertainty," despite increasing economic growth estimates for the year.

"Prudence prevailed, and we think this was the right call—it reduces the risk of renewed pressure on the COP," said Andres Abadia, chief LatAm economist at Pantheon Macroeconomics.

"We expect BanRep to proceed cautiously, with the policy rate falling to around 7.75% by year-end, due to ongoing inflation, FX uncertainty and elevated external noise."

MSCI's regional currencies index .MILA00000CUS rose 0.7% on the day.

Both the broader Latin American stock and currency indices are on track for gains both on a monthly and quarterly basis after a volatile start to the year - the currency index on pace for its best quarter in three years, and stocks for the best since 2023.

Emerging markets have benefited as traders looked for bargains outside of the United States and hoped for flexibility on tariff policy.

Brokerage HSBC said a majority of respondents to its emerging markets sentiment survey still have a positive bias on the asset class.

On the day, China, Japan and South Korea agreed to jointly respond to U.S. tariffs, a social media account affiliated with Chinese state broadcaster CCTV said.

Latin American currencies were mixed against the dollar, with the Mexican peso MXN= dipping 0.6%. Ratings agency Moody's said U.S. tariffs are likely to hit Mexico's economy the hardest.

Brazil's real BRBY, meanwhile, rose 1% and is on track for its strongest quarterly gains since 2022. The central bank's monetary policy director said policymakers "strongly believe" that long-term unanchored inflation expectations are due to concerns over potential fiscal surprises.

Argentina's Merval index .MERV lost 1.8%. The International Monetary Fund views the country's request for a 40% disbursement from the $20 billion new loan program it is negotiating with the global lender as "reasonable," IMF Managing Director Kristalina Georgieva told Reuters.

HIGHLIGHTS

Colombia inflation seen easing in March, rising in 2025 and 2026

*Petrobras lowers diesel prices for first time in more than a year

Key Latin American stock indexes and currencies at 1950 GMT: