EMERGING MARKETS-LatAm stocks jump on hopes of de-escalation in Middle East conflict

By Pranav Kashyap

March 23 (Reuters) - Latin American stocks were on course to end a three-day losing streak on Monday after U.S. President Donald Trump's comments sparked hopes of a de-escalation in the Middle East conflict.

Trump postponed a plan to bomb Iran's power grid ​because of what he described as "productive" talks with unidentified Iranian officials. Iran, however, denied the negotiations had taken place, keeping traders on edge.

An index tracking Latin American equities .MILA00000PUS rose 3.4%, while a corresponding gauge of currencies .MILA00000CUS added 1%.

"Differences in energy dependence, production processes, trade linkages, and policy frameworks imply different growth and inflation outcomes, particularly across emerging markets," Morgan Stanley analysts wrote.

ASIA UNDER PRESSURE, RATE DECISIONS DUE

Markets in Asia, which account for a large chunk of the emerging market equity index .MSCIEF, bore the brunt of the damage since they had already closed by the time signs of a de-escalation sprang up. The benchmark was off 2.2%.

Equities in Istanbul .XU100 and Warsaw .WIG20, both of which had tumbled more than 2% ahead of Trump's remarks, clawed back ground to trade 0.9% and 0.6% higher, respectively.

While Latin America is comparatively better insulated from energy shocks than Asia and Europe, gyrations in crude prices — which plunged as much as 14.4% on the day but remain up nearly 63% year to date — are complicating the interest rate calculus for central banks across the bloc.

Rate decisions this week are due from Hungary, Chile, Mexico and South Africa.

The Mexican peso MXN= bounced off a more than three-month low, last trading up 0.7% against the dollar.

The Bank of Mexico is widely expected to hold rates steady at Thursday's meeting, as policymakers take stock of the inflationary fallout from volatile crude prices against the backdrop of an economy that is beginning to run hot.

"While there are some measures to insulate Mexico from the effects of inflation from the war, inflation is still likely to increase. We expect these concerns to come further into focus given elevated prices due to the Iran war," Rabobank analysts said.

Meanwhile, Brazilian equities .BVSP jumped 3.6%, with planemaker Embraer EMBJ3.SA climbing 6.9% after securing an order for 18 E195-E2 jets from Finnair.

Brazilian economists trimmed their monetary easing expectations for the year, now penciling in rates on hold through December rather than one final 25-basis-point cut, a recalibration that echoes a broader reassessment playing out among central banks worldwide. The real BRL= jumped 1%.

On a broader note, the European Union's long-gestating free trade agreement with South American bloc Mercosur will enter into force on a provisional basis from May 1, the European Commission confirmed.

Key Latin American stock indexes and currencies: