EMERGING MARKETS-Latam assets firm but risk appetite shaky as US trade policy swerves

By Pranav Kashyap

Feb 23 (Reuters) - Latin American markets ticked up on Monday, as investors tiptoed around the latest twists in U.S. trade policy, while Mexican assets were largely steady after a weekend military raid that killed cartel leader Nemesio Oseguera.

MSCI's index tracking currencies in the region .MILA00000PUS rose 0.3%, while the currencies equivalent .MILA00000CUS was up 0.5%.

Mexico's peso MXN= fell 0.4%, stocks .MXX and the 10-year yield MX10YT=RR were unchanged.

The raid triggered backlash as cartel gunmen reportedly blockaded highways with burning vehicles and torched businesses across more than half a dozen states, bringing parts of the country to a standstill.

The operation comes amid mounting pressure from Washington on Mexico to intensify its offensive against cartels accused of producing and trafficking drugs, especially fentanyl, into the United States.

Separately, Mexico's economy grew more than expected in the fourth quarter, logging its strongest quarterly expansion in more than a year and reinforcing the case for a prolonged pause in interest rates.

Elsewhere in Latin America, price action in currencies stayed range-bound as murky U.S. trade signals sapped risk appetite. The U.S. Supreme Court struck down President Donald Trump's emergency tariffs, after which he announced a new 10% levy on the rest of the world, only to lift it again to 15% soon after.

"The key issue for markets is not just the tariff level itself, but the unpredictability surrounding what comes next," said Daniela Hathorn, senior market analyst at Capital.com.

The region is also navigating diverging rate paths that complicate the monetary-policy outlook and, in turn, carry-trade opportunities. Although Brazilian and Mexican shares are up for the month, equities in Colombia and Argentina are in the red.

This week brings key inflation prints from Mexico and Brazil, while softer dollar pressure has offered some breathing room for currencies.

The Argentine peso ARS= jumped 1.1%, but stocks .MERV fell 1.5%. The Chamber of Deputies on Friday approved a labor reform with modifications that had already been voted on in the Senate, so now it must be ratified by the Lower House to become law.

The Brazilian real BRL= rose 0.6% to its highest level in nearly two years, while stocks .BVSP hovered near record highs, up 0.2%.

The U.S. court's striking down of Trump's tariffs removed levies specifically targeting Brazil, thus restoring its competitiveness in the U.S. market, the country's vice-president said.

"Some countries, particularly emerging economies such as Brazil, China and India, benefit greatly from the reduction and might experience a significant frontloading of their exports to the U.S.," UniCredit analysts said.

Outside the region, Israeli stocks .TA125 and the shekel ILS= were little changed as investors digested the central bank's decision to hold rates steady, defying expectations for a cut.

Key Latin American stock indexes and currencies: