EMERGING MARKETS-Argentine assets extend gains on US support signals; rest of LatAm trade higher

By Nikhil Sharma and Pranav Kashyap

Sept 23 (Reuters) - Argentine assets extended their gains on Tuesday, buoyed by fresh confidence Washington will throw its weight behind efforts to rescue the country's battered assets.

Argentina's peso ARS=RASL vaulted as much as 5%, extending its two-day rally to over 7%, while the benchmark stock index staged a sharp reversal from earlier in the day for a 1.1% gain, building on Monday's 7.5% surge.

Dollar bonds kept up their blistering pace, with the 2030 maturity US040114HS26=TE rising 4.7 cents on the dollar.

The rally got a fresh thrust from Trump, who pledged to stand shoulder-to-shoulder with President Javier Milei, and noting Argentina did not need a bailout.

"We are giving the president of Argentina our full backing and endorsement," Trump said.

The World Bank also announced plans to fast-track up to $4 billion in support.

U.S. Treasury Secretary Scott Bessent had vowed "large and forceful" support to Argentina, dangling options such as swap lines and direct currency buys from the $219.5 billion Exchange Stabilization Fund.

"For the short term, it's certainly good. That's a very big improvement for ARS against the dollar," said Juan Perez, director of trading at Monex.

"But in the long term, we'll see what the commitment actually materializes into."

Separately, Argentina's economic activity likely grew 3.3% year-on-year in July, according to analysts polled by Reuters. Official data is set to be released on Wednesday.

The country's July retail sales data is due later in the day.

The Brazilian real BRL= jumped nearly 1%, while Sao Paulo's main stock index .BVSP advanced 1.1% and is set for its best day in over a month.

Investor sentiment was boosted after Trump said he plans to meet Brazilian President Luiz Inacio Lula da Silva next week, describing their brief U.N. General Assembly encounter as marked by "excellent chemistry".

The real snapped a four-day losing streak, mainly powered by the hawkish minutes from the central bank's latest policy meeting where the bank said policymakers would not hesitate to resume a hiking cycle if deemed appropriate. The central bank held the Selic rate steady at 15%, a near two-decade high.

"We could see some profit taking in the real, wouldn't be surprised if we saw some technical correction, but in the near-term the overarching trends still continue to benefit the real in the remainder of 2025," said Wilson Ferrarezi, Brazil Economist at TS Lombard.

On a broader level, MSCI's index for Latin American currencies .MILA00000CUS was up 0.9%, flirting with record levels, while a gauge of the region's equities .MILA00000PUS rose over 1.4% to its highest in over one year.

Mexican equities .MXX edged higher, while the peso MXN= was flat as fresh data pointed to a deepening economic slowdown.

The country's GDP contracted 0.9% month-on-month in July and 1.1% year-on-year, highlighting the drag from elevated interest rates despite a series of cuts earlier this year.

Banxico is scheduled to make a rate decision on Thursday, where markets broadly expect a 25-bps cut to bring the benchmark rate down to 7.50%. But policymakers may tread cautiously given the fragile trade growth backdrop.

Separately, retail sales rose 0.1% in July from June and increased 2.4% in July on a year-on-year basis.

The Colombian peso COP= reversed gains, slipping 0.2%, while local equities .COLCAP were flat.

The peso of the world's biggest copper producer, Chile CLP=, advanced 0.9%, aided by higher red metal prices. The Santiago stock index .SPIPSA edged 0.3% higher.

Key Latin American stock indexes and currencies: