EMERGING MARKETS-Latin American stocks set for weekly gains; war fatigue lingers

By Pranav Kashyap

March 27 (Reuters) - Latin American stocks were on track for weekly gains on Friday, capping a turbulent week that offered investors a little glimmer of calm in a conflict that has rattled global energy markets for nearly a month.

Banxico, the country's central bank, surprised markets on Thursday with a 25-basis-point rate cut - a move aimed at jump-starting an economy that has stubbornly refused to gain momentum.

Mexican stocks .MXX, snapped what had been their longest weekly losing streak since June 2024, and putting the index on course for its first weekly gain in six.

But the cut comes with a caveat. Inflation continued to climb, a reminder that policymakers are trying to revive growth amid spiking energy prices - a direct consequence of the ongoing conflict in the Middle East, have forced central banks worldwide to rethink their rate outlooks.

A broader gauge tracking Latin American equities .MILA00000PUS, was down 0.9% on the day. But it was set to break a four-week losing streak, as markets drew cautious optimism from diplomatic signals out of Washington and Tehran this week.

"Governments in Latin America, unlike those in other parts of the emerging world, have generally refrained from large fiscal measures to shield households and businesses from higher energy prices. While that’s good news for the public finances, it does mean that inflation will rise sharply, " said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

"This week's central bank meetings and communications suggest that, so far, policymakers don't appear to be too concerned by that."

U.S. President Donald Trump said he would again extend the deadline for Iran to reopen the Strait of Hormuz or face the destruction of its energy plants, after Tehran had earlier rejected a 15-point U.S. proposal to end the fighting as unfair.

However the euphoria was diminished as both sides offered sharply different accounts of any diplomatic progress and casting a long shadow over hopes for a swift resolution.

The currencies gauge .MILA00000CUS was down 0.6% on the day.

Brazil's real BRL= was flat as markets digested the country's current account deficit that came it slightly wider than expected.

Elsewhere, the financial toll of the Middle East conflict continued to register in Israel's debt markets, where investors kept demanding a higher premium to hold the country's bonds.

The yield on the country's 10-year IL10YT=RR and 5-year note IL5YT=RR touched its lowest since September 2025.

Global ratings agency Fitch on Friday reaffirmed Israel's "A" credit rating, saying recent military operations will likely sharply reduce Iran's threat to the country, but kept a negative outlook.

Meanwhile, A U.S. appeals court on Friday struck down a $16.1 billion judgment against Argentina for seizing control of state-owned oil company YPF YPFDm.BA in 2012.

Stocks in Buenos Aries .MERV lost 0.7%, and remains the worst performing index in Latin America, year-to-date wise.

Key Latin American stock indexes and currencies: