EMERGING MARKETS-US endorsement sparks buying frenzy in Argentine assets, rest of LatAm mixed

By Nikhil Sharma and Pranav Kashyap

Sept 24 (Reuters) - Argentine assets surged for a third straight session on Wednesday, buoyed by Washington's robust show of support for President Javier Milei's government and the country's financial markets.

Washington disclosed details of a financial lifeline to Argentina, with U.S. Treasury Secretary Scott Bessent revealing talks for a $20 billion swap line with the country's central bank and signaling readiness to purchase Argentine dollar bonds in the secondary market.

The announcement followed Milei's meeting with U.S. President Donald Trump, who endorsed the libertarian leader and dismissed the need for an international bailout.

Argentina is set to hold legislative midterm elections on October 26, where Milei's party seeks to gain seats to bolster its minority position in parliament.

Numerous U.S. companies are prepared to invest in Argentina "in the event of a positive election outcome", Bessent said.

Additionally, the World Bank has pledged $4 billion in funding over the coming months to support the South American nation's reform agenda.

Argentina's international bonds rallied, with a 2029 note US040114HX11=TE jumping 4.4 cents on the dollar.

INVESTORS 'MORE COMFORTABLE' WITH US SUPPORT

The peso ARS=RASL climbed to a one-month high, up 2.4% on the day and nearly 10% since Monday, clawing back losses from Milei's September 7 legislative setback. Buenos Aires stocks .MERV extended their winning streak, surging 1.8% to notch a three-day gain of nearly 12%.

"The swap line is very important for Argentina at this point because the market was discussing if Argentina would be able to honor the US dollar denominated maturities in the in the coming years," said Murilo Riccini, head of Andean & Argentina equity strategy at Bradesco BBI.

"The delta of the polls and approval rating of the government until the election will be key to seeing if the market can hold this rally or not. What we don't want to see is situations like last week where the central bank needed to sell the dollars."

In broader Latin America, the currencies index .MILA00000CUS lost 0.6%, with a stronger U.S. dollar weighing on the regional currencies after Federal Reserve Chair Jerome Powell struck a cautious tone on further policy easing.

The Brazilian real BRL= fell 0.8%, set for its steepest one-day loss in over a month, while Sao Paulo's main stock index .BVSP was flat, just off record levels. Fresh data showed a jump in Brazilian consumer confidence to its highest level since the end of last year.

Treasury Secretary Rogerio Ceron said the government may issue up to $2 billion in green bonds before year-end, signaling a fresh push to tap sustainable finance markets.

Meanwhile, MSCI's gauge of the region's equities .MILA00000PUS also slipped about 0.7%.

Mexican equities .MXX slid nearly 1% and the peso MXN= dropped 0.4%, both on track for their steepest single-day fall in a month, as inflation accelerated in early September, brushing up against the central bank's target ceiling.

The hotter-than-expected data arrives just ahead of Banxico's rate decision on Thursday, with economists still predicting a modest cut, betting the central bank will prioritize sluggish growth over inflationary concerns.

If implemented, it would represent the 11th quarter-point reduction since the beginning of 2024, highlighting the central bank's cautious shift amid a fragile economic recovery.

The Colombian peso COP= weakened by 0.8%, while stocks .COLCAP remained stable.

Colombia is also gearing up for a rate decision. The central bank is expected to hold rates next week and extend that trend for the rest of the year.

Chile's peso CLP= fell 0.4%, while its main stock index .SPIPSA flipped to trade 0.7% lower. Peruvian stocks .MXNUAMPESCPGPE were a standout, up 1.8% to hit an all-time high. Miner Minsur was set to start work on a $500 million copper mine in October.

Key Latin American stock indexes and currencies: