EMERGING MARKETS-Argentine markets spring back to life after US pledges support

By Nikhil Sharma

Sept 22 (Reuters) - Latin American assets struggled on Monday following gains last week, while Argentine markets bounced back on expectations of the U.S. offering potential support to the country's finances.

Stocks in Buenos Aires soared 4.9%, with financial firms rallying: Grupo Financiero Galicia GGALm.BA up 8.7%, Banco Macro BMAm.BA up 8.3%, and Grupo Supervielle SUPVm.BA up 10.6% in early trading.

Argentina's international dollar bonds also rallied, with the 2046 maturity US040114HW38=TE jumping 5.7 cents to the dollar.

U.S. Treasury Secretary Scott Bessent said "all options for stabilization are on the table" to support Argentina's government, with options including swap lines and direct currency purchases.

The peso ARS=RASL, whose selloff triggered the central bank's intervention last week, jumped 2% to approach its best day since early May and also snapped 13-day streak of losses.

The moves contrast with the recent collapse in local markets after a legislative setback for President Javier Milei, which underscored his waning influence and raised questions about the viability of his austerity agenda if his party falters in the upcoming midterms.

"If you're using the reserves to try to stabilize the FX market, there's less reserves to pay for the debt," said Alejandro Cuadrado, global head of FX and LatAm Strategy at BBVA.

Cuadrado further noted that while U.S. support could provide a temporary cushion for the central bank and help stabilize conditions in the near term, it does not resolve the medium‑term problems or ease investor jitters ahead of the October 26 midterms.

Bessent said further details of U.S. support would be discussed during President Donald Trump's meeting with Milei on Tuesday.

Meanwhile, MSCI's index for Latin American currencies .MILA00000CUS dipped 0.08%. A gauge of the region's equities .MILA00000PUS lost 0.76%.

The day's moves follow strong performances last week for both indexes, underpinned by the U.S. Federal Reserve's first policy reduction of the year and the projections of further cuts.

Mexico's local equity index .MXX was up 0.13% and the local peso MXN= flattened as traders positioned themselves for a quarter point interest rate cut by the central bank on Thursday.

Driven by concerns over the slowing economy, the expected cut would mark the 11th moderate cut by Banxico ever since it began its easing cycle at the start of 2024.

But the economic outlook for Mexico remains clouded, with International Monetary Fund calling for structural and fiscal reforms to bolster stability. The IMF on Friday forecast growth to improve modestly in 2026.

The Brazilian real BRL= fell 0.54% ahead of this week's mid-month inflation data. Its central bank holding rates at a near 20-year high last week and foreshadowed more pauses going ahead.

However, the growing interest-rate differential with the United States will continue to support additional carry trade inflows and could boost the currency.

Sao Paulo's main stock index .BVSP dropped 1% - set for its biggest single-day fall in over a month.

The Colombian peso COP= jumped 0.8% to trade at an over one-year high, while stocks .COLCAP slipped 0.3% ahead of July's trade data.

In corporate news, LATAM Airlines LTM.SN announced a firm order for 24 E195-E2 aircraft from planemaker Embraer EMBR3.SA, plus purchase options for 50 more. Shares of Embraer jumped 3.6% and LATAM Airlines fell 4.1%.

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