EMERGING MARKETS-LatAm assets fall as commodity price declines weigh

By Twesha Dikshit and Ragini Mathur

Jan 16 (Reuters) - LatAm assets retreated on Friday, as commodity and oil prices logged further declines after geopolitical rhetoric cooled, prompting investor caution after a solid start to the year for the resource-heavy region.

The MSCI Latin American equities gauge .MILA00000PUS dropped 0.6% but was set for weekly gains of around 1%. A similar gauge tracking currencies .MILA00000CUS was down 0.2% but also on track to end the week higher.

While some global risks remained with Trump's insistence on acquiring Greenland and European attempts to counteract, cooling rhetoric on military intervention in Iran and firing of Federal Reserve Jerome Powell allayed some investor fears.

"LatAm's strong export performance has been driven by a combination of increasing prices, volumes and supportive geopolitical situation," said Andres Abadia, chief Latin American economist at Pantheon Macroeconomics.

"External noises have dragged down commodity prices. Economies like Brazil and Chile and even Argentina, which is closely linked to agricultural prices but not to metal commodities, have also suffered with the news."

JPMorgan flows data showed EM equity funds clocked record inflows this week at over $9.7 billion, the second-largest weekly inflow in tracking history. LatAm inflows came in at over $541 million, highest since March 2018.

Markets have navigated a range of geopolitical events to kick start the year including tensions in Venezuela, Iran and Greenland, but have proven resilient with many global indexes trading at all-time highs.

EQUITIES, CURRENCIES FALTER AS COMMODITY RALLY COOLS

Colombia's benchmark index .COLCAP was the only bright spot, gaining almost 1% and set to end the week up by more than 3%. Copper-exporter Peru's index .MXNUAMPESCPGPE was flat following the metal's price but was set to end the week higher.

Brazil's equities .BVSP dropped 0.5%. The IBC-Br economic activity index, a proxy for GDP, gained 0.7% in November month-on-month, the central bank said on Friday, beating expectations of a Reuters poll of economists.

Brazil's Brava Energia BRAV3.SA fell almost 3% after the oil firm said it would buy stakes in two offshore fields from Malaysia's Petronas.

Argentina's shares .MERV were flat. The country's mining exports hit a record $6 billion in 2025, the economy ministry said. The peso ARS= strengthened 0.6% against the greenback.

Most currencies weakened against the dollar =USD which was set to end the week a touch stronger following upbeat economic releases.

The Chilean peso CLP= was down 0.4%, tracking copper prices. The Mexican peso MXN= and Brazilian real BRL both dropped 0.3% each.

In trade news, the landmark European Union and Mercosur free trade agreement was set to be signed in Paraguay on Saturday after 25 years of negotiations, in the largest such trade accord for the EU.

Key Latin American stock indexes and currencies at 14:51 GMT: