talks@ (Recasts with peso gains, updates prices) MEXICO CITY, Oct 17 (Reuters) - Mexico's peso surged on Tuesday after aggressive U.S. demands appeared to have not yet sunk hopes of reaching a new North American trade deal while stocks in Brazil fell on worries the country's president could face a corruption trial. Mexico's peso gained about 1.5 percent after trade ministers from the United States, Canada and Mexico wrapped up a contentious round of talks and said they would extend a deadline to finish into early next year. It was the peso's biggest one-day gain in about 4-1/2 months in what analysts said may be just a short-term rally amid concerns that U.S. President Donald Trump could still try to slap tariffs on Mexican-made goods. "The good news is that they are sticking to talks despite the worry of a break following the inflexible, protectionist U.S. proposals," Banco Base analyst Gabriela Siller wrote in a note to clients. Washington's demands include forcing renegotiation of the pact every five years, reserving the lion's share of automotive manufacturing for the United States and making it easier to pursue import barriers against some Canadian and Mexican goods. Siller warned the peso was likely to weaken in the weeks ahead "as we hear pessimistic declarations from governments, analysts and business groups from the three countries." Before its rebound on Friday, the peso had shed close to 5 percent this month on concerns that talks to revamp the 23-year old North American Free Trade Agreement (NAFTA) could founder. Meanwhile, stocks in Brazil fell nearly 1 percent as lawmakers debated whether to put President Michel Temer on trial before the Supreme Court, a potential blow to his agenda of market-friendly reforms. Traders largely expect the center-right president to successfully dodge corruption charges, as he did with a similar string of accusations earlier this year. Still, a smaller-than-expected show of support for Temer could indicate he will struggle to pass belt-tightening measures, such as streamlining the nation's bloated social security system. Shares of planemaker Embraer SA were the biggest decliners, dropping the most in seven months after France's Airbus SE acquired a majority stake in Embraer competitor Bombardier Inc's CSeries jetliner program.
Key Latin American stock indexes and currencies at 2050 GMT:
Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1125.66 -0.54 30.55 MSCI LatAm 2931.21 -0.68 25.23 Brazil Bovespa 76201.25 -0.9 26.52 Mexico IPC 50140.52 0.84 9.85 Chile IPSA 5483.30 -0.04 32.08 Chile IGPA 27483.57 0.03 32.55 Argentina MerVal 26622.40 -1.91 57.36 Colombia IGBC 11030.57 -0.48 8.91 Venezuela IBC 561.75 2.07 -98.23 Currencies daily % YTD % change change
Brazil real 3.1680 0.12 2.56 Mexico peso 18.7500 1.49 10.63 Chile peso 621.08 -0.27 7.99 Colombia peso 2948.75 -0.60 1.79 Peru sol 3.244 -0.03 5.24 Argentina peso 17.3300 0.10 -8.40
Argentina peso 17.97 -0.39 -6.40
(Writing by Michael O'Boyle; Editing by James Dalgleish)