EMERGING MARKETS-LatAm assets advance on elevated Fed rate cut expectations

By Niket Nishant and Twesha Dikshit

Nov 25 (Reuters) - Latin American stocks and currencies rose on Tuesday as hopes of a December interest rate cut by the Federal Reserve and a rebound in global risk appetite prompted traders to cautiously rebuild positions after last week's rout.

The MSCI index tracking regional stocks .MILA00000PUS rose 1.2%, mirroring upbeat global market sentiment. A broader index of regional currencies .MILA00000CUS climbed 0.5% as a weaker U.S. dollar following a slew of mixed economic data reinforced expectations for the Fed to cut rates.

Developments in recent sessions, including the release of delayed official U.S. data after the government shutdown, shifting expectations for a Fed rate cut, and signs of progress toward a possible Ukraine peace deal, have largely dictated sentiment across global markets.

Emerging markets, in particular, have remained vulnerable to global and U.S. triggers, as seen in last week's selloff on concerns about overvalued AI-focused stocks on Wall Street and uncertainty about the Fed's policy outlook.

"We assume financing conditions for emerging markets remain benign in 2026, as the Fed continues to cut rates and the recent weakness in the U.S. dollar is broadly sustained," analysts at S&P Global wrote in a note.

"Favorable financing conditions, combined with low unemployment levels and improving real wages, will help domestic demand remain relatively robust in 2026 in most emerging markets."

DIVERGENCE IN REGIONAL PERFORMANCE

In Brazil, the Bovespa .BVSP pared early gains to add 0.33%, while the real BRL= also strengthened 0.3% against the greenback.

Data showed foreign direct investment inflows through October have already surpassed the 2024 total. The government expects FDI to reach a record high this year, which should help offset a worsening current account balance in Latin America's largest economy.

Brazil faces a presidential election next year, with a recent poll giving President Luiz Inacio Lula da Silva a favorable lead against all potential right-wing challengers.

Former President Jair Bolsonaro, who lost to Lula in 2022, is barred from running. Brazil's Supreme Court on Tuesday ordered Bolsonaro to start serving his sentence of 27 years and three months in prison over a coup-plotting case.

Colombia's peso COP= weakened 0.55% against the dollar, while equities .COLCAP climbed 1.2%.

State-run energy company Ecopetrol ECO.CN on Monday warned that natural gas supply to the country's northern and central regions could be at risk due to an ongoing roadblock at its Guajira field.

Argentine stocks .MERV climbed 2.7% after data showed economic activity grew 5.0% in September from the same month last year, more than double the 2.2% projected by analysts.

The local currency peso ARS=RASL fell 1.54% against the greenback.

Mexican stocks .MXX rose 0.83%, while the peso MXN= strengthened 0.61%. Data released by the national statistics agency on Tuesday showed flat retail sales in September compared to August.

Elsewhere, Bolivia is negotiating multilateral financing that will exceed $9 billion for public and private projects, Economy Minister Jose Gabriel Espinoza said in the first major policy announcement since President Rodrigo Paz took office this month.

Key Latin American stock indexes and currencies: