EMERGING MARKETS-Latam FX steady, stocks mixed as Fed rate cut hopes rise

By Pranav Kashyap, Purvi Agarwal and Sukriti Gupta

Aug 13 (Reuters) - Most Latin American currencies were flat to lower on Wednesday, erasing gains from the previous session, while equities showed mixed performance amid increased expectations of a U.S. Federal Reserve interest rate cut next month.

A gauge tracking the region's currencies .MILA00000CUS was little changed after hitting a record high in the previous session, while a similar measure of stocks .MILA00000PUS fell 0.5%.

Mexico's peso MXN= slipped 0.2%, and Colombia's peso COP= dropped 0.3%, with falling oil prices adding pressure on the latter.

A downbeat retail sales surprise, indicating some cooldown under high interest rates, weighed on Brazil's benchmark equities index .BVSP, set for its worst day in over two weeks. The real BRL= weakened 0.3%.

Ning Sun, senior emerging markets strategist at State Street Global Markets, said, "A lot of the indicators that they (Brazil's central bank) are watching are still pointing to overheating of the economy, so the weakness of retail sales is a welcome sign."

"That should give them more reasons to eventually restart the cutting cycle, but given the fiscal and tariff uncertainty, the central bank wants to be more cautious in this cycle."

Brazil's government unveiled on Wednesday a long-awaited aid package for companies hurt by steep U.S. tariffs.

The South American nation, a member of the BRICS bloc, has faced mounting pressure from U.S. President Donald Trump, who has accused the group of pursuing "anti-American policies".

Other BRICS members, including India and South Africa, are also grappling with some of the highest U.S. tariff rates.

Most Latam currencies traded lower, reversing earlier gains driven by optimism over a potential Federal Reserve rate cut in September.

The sentiment followed tame U.S. inflation data released on Tuesday and comments from Treasury Secretary Scott Bessent, who signaled the likelihood of a 50 basis-point cut.

Emerging markets have generally performed well this month, with assets capitalizing on growing expectations of U.S. rate cuts, even as Trump's tariffs took effect for most trading partners lacking a trade deal with Washington.

Chile's peso CLP=, however, climbed to its highest level in nearly three weeks, while the country's benchmark stock index .SPIPSA rose 1.7% to reach a record high.

Elsewhere in Latin America, Mexican stocks .MXX fell 0.3% on the day, while Colombian stocks .COLCAP edged up 0.2%, marking their sixth consecutive session of gains.

Argentina's stock index .MERV dropped 1.6%. Data showed annual inflation in July reached its lowest level since 2020.

Meanwhile, Trump said Ukraine must be part of territorial talks with Russia, following a virtual meeting with European leaders on Wednesday ahead of U.S.-Russia negotiations set for Friday in Alaska.

Ukraine's international dollar bonds XS2895057177=TE eased slightly, after falling more than 1.2 cents earlier in the day.

Pakistan's international bonds gained as much as 1 cent on the dollar after Moody's upgraded the country's credit rating.

Key Latin American stock indexes and currencies: