EMERGING MARKETS-LatAm stocks advance on US rate cut hopes, Ukraine peace plan in focus

By Purvi Agarwal and Nikhil Sharma

Nov 24 (Reuters) - Latin American stocks rose on Monday as global risk sentiment improved on growing expectations of a U.S. interest rate cut next month, with progress on a Ukraine peace deal also on the radar, while currencies largely traded cautiously.

The MSCI index tracking Latin American equities .MILA00000PUS rose 0.67%, while currencies .MILA00000CUS gained 0.3%. On Friday, both had marked their steepest weekly declines since July and October, respectively, amid a global sell-off in risk assets.

Comments by New York Federal Reserve President John Williams on Friday boosted bets of a December Federal Reserve rate cut, with optimism around lower rates lifting global market sentiment on Monday, spilling into Latin America.

Meanwhile, the U.S. and Ukraine sought to narrow gaps in a peace plan to end the war with Russia after agreeing to modify a U.S. proposal that Kyiv and its European allies saw as a Kremlin wish list.

Expectations that a Russia-Ukraine deal was close lifted appetite for Ukrainian assets, sending its international bonds soaring on Monday. The 2035 maturity XS2895056369=TE was up 2.1 cents on the dollar. Ukraine-focused stocks also gained, with London-based miner Ferrexpo FXPO.L climbing 22.3%.

In Latin America, Brazil's real BRL= was 0.2% higher, while stocks .BVSP gained 0.3%. The country's central bank governor expressed dissatisfaction with the progress toward bringing inflation back to its target, despite keeping the benchmark rate at a near two-decade high to curb price pressures.

Separately, the bank sold $2 billion in an auction with a repurchase agreement.

A panel of Brazil's Supreme Court voted on Monday to keep Jair Bolsonaro in police custody, after the ex-president was detained on Saturday.

"There is no change in Bolsonaro's ineligibility situation, but this event is an escalation of uncertainties related to who will run through the right wing in the 2026 election," said Citigroup analysts.

Colombia's peso COP= was flat. Stocks .COLCAP slipped 0.5%, the only outlier among peers. Colombia repurchased over $4 billion in bonds and placed 2 billion euros in global notes, the finance ministry said on Friday.

Currencies in Mexico .MXN= and Chile CLP= fell 0.35% and 0.16% respectively, although stocks moved higher.

Mexico's annual inflation rate hit 3.61% in the first half of November, data showed, slightly above expectations of economists polled by Reuters.

"The Mexican inflation outturn of 3.6% y/y in the first half of November, coming alongside the contraction in GDP in Q3, means Banxico will probably opt for another 25bp cut at its next meeting (despite policymakers' growing cautiousness about the easing cycle)," Capital Economics analysts said in a note.

Among economic indicators from the region, focus will center on key employment reports from Mexico, Chile, Colombia, and Brazil, which are due later in the week.

Meanwhile, a Reuters report said that the U.S. is poised to launch a new phase of Venezuela-related operations. Venezuela rejected the plan as "ridiculous".

Markets in Venezuela and Argentina were closed for public holidays.

Argentina's economy minister said on Friday that officials did not speak with U.S. banks about a $20 billion rescue package.

In October, the U.S. Treasury had reached a $20 billion exchange-rate stabilization agreement with Argentina, to be paired with a bank-led debt facility for the same amount.

Elsewhere, the International Monetary Fund said Poland must prioritize curbing the rapid increase in its public debt.

And Israel's central bank delivered an expected 25 basis-point rate cut, its first since January 2024. The shekel ILS= pared some declines to trade 0.1% lower against the dollar.

Key Latin American stock indexes and currencies: