EMERGING MARKETS-LatAm assets fall as Powell jitters undercut risk appetite

By Niket Nishant

Dec 10 (Reuters) - Latin American assets resumed their decline on Wednesday, following a one-day reprieve as investors braced for potentially hawkish commentary from Federal Reserve Chair Jerome Powell.

The MSCI index of Latin American stocks .MILA00000PUS slid 0.6%, while the currencies gauge .MILA00000CUS fell 0.4%.

The price action indicates that although a 25-basis point cut is already priced in, investors may be expecting Powell to dampen prospects for further easing, reducing the appeal of emerging market assets.

Emerging market assets typically benefit when the Fed lowers rates, as cheaper U.S. funding reduces financing costs for companies in the region and encourages investors to seek better returns in higher-yielding currencies.

INVESTORS JUGGLE POLITICAL FACTORS, INFLATION DATA

Investors are also focused on a series of political and economic developments. Data on Wednesday showed Brazil's 12-month inflation slowed in November to its lowest level in more than a year, ahead of the central bank's final policy decision of 2025, where it is widely expected to keep rates on hold.

The Bovespa index .BVSP edged 0.3% higher, steadying a day after being rattled by the presidential bid of Senator Flavio Bolsonaro, the eldest son of former President Jair Bolsonaro.

The real BRL= fell 0.5% against the dollar, marking a second consecutive day of losses.

In Argentina, stocks .MERV gained 0.2% while the peso ARS=RASL rose 0.1%. The newly elected Congress will begin a period of special legislative sessions in which President Javier Milei intends to push a series of reforms he has said are necessary to boost the country's economy.

The country is also looking to issue bonds worth around $1 billion, targeting a coupon rate below 9%. Most of its dollar-denominated bonds were trading slightly higher.

Colombian stocks .COLCAP slid 0.3% and the local peso COP= was little changed. A magnitude 5.8 earthquake struck the northern part of the country.

Separately, Reuters reported that the country's guerrilla group, the National Liberation Army, is willing to resume peace negotiations with the current government, or with whichever new government is elected next year if commitments previously agreed upon at stymied peace talks are honored.

Chilean equities .SPIPSA were up 0.4%. Far-right candidate Jose Antonio Kast is widely expected to win Chile's presidential run-off on Sunday and become the country's most conservative leader since its military dictatorship. The peso CLP= rose 0.3% against the greenback.

"A Kast victory would reinforce the recent surge of right and far-right political actors in Latin America," wrote Ken Roberts, a professor of government with a specialization in Latin American politics at Cornell University.

"But it would also continue a much longer pattern of volatile anti-incumbent voting in Latin America's turbulent democratic waters."

Separately, Mexico's lower house approved tariffs of up to 50% from next year on imports from China and several other Asian countries. Its assets were largely steady.

Key Latin American stock indexes and currencies: