EMERGING MARKETS-LatAm assets begin year firmer, Venezuela strikes a softer diplomatic note

By Niket Nishant and Pranav Kashyap

Jan 2 (Reuters) - Latin American stocks started the year in the green on Friday, while Venezuela grabbed the spotlight after President Nicolas Maduro softened his tone toward U.S. President Donald Trump.

Several of Venezuela's dollar-denominated bonds were up between 1 cent and 3 cents on the dollar, according to Tradeweb data. The country has been in default since 2017.

Escalating tensions between Washington and Caracas have posed a risk to the region since late last year, and have at times raised the specter of regional heavyweights such as Brazil and Mexico being pulled into the crossfire.

Against that backdrop, Maduro called Venezuela a "brother country" to the U.S., while proposing serious talks on fighting drug trafficking and offering U.S. companies access to Venezuelan oil.

A de-escalation could give investors some reason to cheer, especially as they head into a year of unknowns. While risks related to elections are front and center, the region will also face tougher comparisons with 2025, when Latin American assets logged their strongest annual performance since 2009.

Geopolitical risks remain in focus across emerging markets. Ukraine's international bonds slipped after fresh tensions between Kyiv and Moscow dented hopes of an imminent ceasefire in the war triggered by Moscow's 2022 full-scale invasion.

"We see it as difficult for Ukraine's President Volodymyr Zelenskiy to sign any territorial concessions and are uncertain as to what is acceptable on the Russian side," said James Blanning, senior economist at Tellimer Research.

REAL LEADS LATAM FX

Latin American assets pushed higher, with MSCI's regional equities index .MILA00000PUS up 0.37% and its currency gauge .MILA00000CUS rising 0.67%. Brazil set the pace in FX as the real BRL= jumped 1% to a more-than-two-week high versus the dollar, even as the Bovespa index .BVSP slipped 0.5%. The brighter tape, however, clashed with a softer signal from the economy.

Brazil's December manufacturing PMI came in at 47.6, "weak," as Goldman Sachs economists put it.

The Mexican peso MXN= rose 0.3%, and stocks .MXX fell 0.7%, as investors positioned ahead of a key slate of local data next week, with December inflation figures and minutes from the Bank of Mexico's latest policy meeting.

Chilean stocks .SPIPSA fell 0.5% following data that showed economic activity in November fell short of estimates.

In Argentina, the Merval index .MERV rose 1% and the peso ARS=RASL was down 1.3%. The peso has started trading under a new phase of the central bank's monetary program aimed at building international reserves.

Peru's Lima bourse .MXNUAMPESCPGPE rose 1%, helped by higher gold prices. Gold is one of the country's top exports.

Data released on Thursday also showed that consumer prices rose more than expected in December.

Key Latin American stock indexes and currencies: