EMERGING MARKETS-Latam stocks jump, FX at 10-month high as tariffs on region less than feared

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 .MILA00000CUS rose 1.5% to hit a 10-month high as the dollar =USD 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 .MXX rose 0.5%.

A gauge of regional stocks .MILA00000PUS advanced 1%, despite a slump in other global equity markets as investors rushed for safe havens such as government bonds. MKTS/GLOB

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 BRBY 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 YPFDm.BA dropped 4.2%, Colombia's Ecopetrol ECO.CN fell 3.9% and Brazil's Petrobras PETR4.SA 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 AR217736501= and 2041 040114HV5=1M 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 XS2966242336=TE 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: