EMERGING MARKETS-Latam assets set for weekly gains as trade tensions appear to ease

By Pranav Kashyap and Nikhil Sharma

April 25 (Reuters) - Latin American stocks were set to log their biggest one-week jump in more than two years on Friday, as conversations around potential de-escalation in the U.S.-China trade conflict bolstered investor sentiment.

The MSCI gauge for Latin American stocks .MILA00000PUS was up 0.3% on Friday, on pace to log its biggest weekly gain since December 2022.

China exempted certain U.S. imports from its towering 125% tariffs and asked firms to identify critical goods they need levy-free, according to businesses notified.

In an interview , U.S. President Donald Trump said that U.S.-China talks were underway, a claim Beijing has denied so far.

"After weeks of heightened uncertainty, investors have responded positively to signs hinting at a possible de-escalation of the conflict," said Quasar Elizundia, research strategist at Pepperstone.

"The market seems eager to believe that peak tension may be behind us, clinging to any indication of progress on the trade front."

Mexico's benchmark index .MXX inched up 0.7%, boosted by Grupo Mexico GMEXICOB.MX that rose 2.1% after the mining and transport conglomerate reported a 17% increase in its net profit during the first quarter.

The index also hit a weekly gain of more than 6% - the most among regional peers. The local currency peso MXN= rose 0.3%, marking a third consecutive week of gains.

Meanwhile, data showed Mexico's economy grew in February, exceeding expectations and disproving forecasts that the country might have entered a technical recession in the first quarter of 2025.

A Latam currencies gauge .MILA00000CUS inched 0.1% higher, on track for its strongest weekly showing in more than eight months.

Data from Citigroup showed emerging markets funds posted inflows of $1.1 billion this week, while fund inflows into China stood at $1.3 billion.

Relatively lower U.S. import tariffs on South American countries have partly protected Latin American assets from extreme selling pressures, unlike their international peers.

However, political and trade uncertainties are expected to weigh on economic growth in Latin America, according to forecasts from the International Monetary Fund and the World Bank earlier this week.

In Brazil, the local Bovespa index .BVSP was flat, with miner Vale VALE3.SA falling 2.8% after reporting a decline in its first-quarter net profit.

Brazilian funds witnessed $400 million worth of outflows this week - their largest outflows in about a year, according to Citigroup.

On Friday, the real BRL= was muted and on track for its second straight week in advance.

Data showed annual inflation sped up in line with market expectations in early April, stoking expectations that the domestic central bank will hike interest rates.

Chile's peso CLP= dipped 0.1% ahead of a credit rating review by Moody's.

Argentina's peso ARS=RASL reversed early losses to rise 0.6%, but hit a weekly decline following the central bank's recent decision to allow it to trade within a controlled range.

A broader emerging market equity index .MSCIEF has recovered losses incurred since Trump unveiled steep duties on world economies earlier this month.

Elsewhere, Sri Lankan bonds XS2966242096=TE, XS2966242179=TE, XS2966241361=TE gained more than 1 cent each after the IMF said it reached a reached a staff-level agreement with the island nation.

Key Latin American stock indexes and currencies: