EMERGING MARKETS-LatAm stocks muted as investors weigh Middle East war impact

By Johann M Cherian and Niket Nishant

March 30 (Reuters) - Latin American equities were subdued on Monday, slipping back into negative territory after a brief reprieve earlier in the session as the fallout from the Middle East conflict weighed on sentiment.

An MSCI gauge of regional equities .MILA00000PUS fell 0.3%, following gains of 1.2% earlier in the session. The equivalent index for currencies .MILA00000CUS dipped 0.5%.

The mid-session reversal highlights how difficult it has become for equities to maintain momentum as the U.S.-Israel war against Iran grinds on, leaving even modest advances vulnerable to swift reversals.

"Without clear evidence of an endgame for the Iran war, stocks will find it difficult to see past the current volatility and sustain upside momentum," said James McCann, senior economist, investment strategy at Edward Jones.

Iran described U.S. proposals to end the war in the Middle East as "unrealistic, illogical and excessive," while unleashing more missiles on Israel.

Over the weekend, Yemen's Iran-backed Houthis entered the fray, launching an attack on Israel for the first time in the current war and deepening fears of a wider conflict.

"As the geographic coverage of the war extends, so does the list of countries exposed to collateral damage," said Hasnain Malik, Tellimer's geopolitical risk and EM equity strategist.

BRAZILIAN ECONOMISTS EXPECT HIGHER PRICES

A weekly central bank poll of Brazilian economists showed they expect price pressures to rise in the months ahead. However, Central Bank of Brazil Governor Gabriel Galipolo said the institution needed time to gauge the impact on the economy.

Brazil's Bovespa index .BVSP added 0.4%, while the real BRL= fell 0.3%. Chile's peso CLP= dropped 1% and Peru's sol PEN= dipped 0.4%.

Mexico's peso MXN= edged 0.1% lower against the dollar as investors assessed remarks from central bank Governor Victoria Rodriguez that the institution may soon end its period of rate cuts.

Trade talks also dominated headlines as countries forged new relationships following last year's bout of trade uncertainty.

Canada said it was hoping to conclude a free-trade agreement with South America's Mercosur by the autumn, months after the European Union signed a similar deal with the regional trade bloc.

Brazil blocked a bid by the U.S. and other countries to extend a moratorium on customs duties for electronic transmissions at the World Trade Organization, which Brazil said was cutting off a key source of revenue for governments.

The country's central government posted a smaller-than-expected primary deficit last month, as revenue growth outpaced the increase in spending - a major point of concern for investors in the region.

In Argentina, YPF YPFDm.BA gained 3% after a U.S. appeals court struck down a $16.1 billion judgment against Argentina for seizing control of the state-owned oil company in 2012. The judgment marked a victory for Argentine President Javier Milei as he tries to stabilize the country's long-strained economy.

U.S. President Donald Trump signaled he was reversing course on blocking oil shipments to Cuba, just weeks after he threatened the country's government.

Key Latin American stock indexes and currencies: