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EMERGING MARKETS-Mexico markets jump on NAFTA talks optimism

SAO PAULO, March 21 (Reuters) - Mexican markets rose on Wednesday on growing bets that the United States could soften its stance on regional trade negotiations looming large over the fortunes of Mexican exporters. U.S. President Donald Trump's administration dropped a demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 percent U.S. contents, the Globe and Mail newspaper reported, citing sources. The report fueled speculation that talks around the North American Free Trade Agreement (NAFTA) could edge closer to a conclusion after dragging on longer than expected. Concerns that Trump's protectionist leanings could threaten Mexico, which sells around four-fifths of its exports to the United States, have weighed on demand for Mexican assets. But the country's currency and stocks spiked on Wednesday as those fears dimmed. The peso was up nearly 1 percent, leading gains among Latin American currencies and tracking similar strength in the Canadian dollar. In a report, Grupo Banorte cited "speculation of a looser stance and the prospect of a swift agreement" as driving sharp gains in those markets. Mexico's benchmark S&P/BVM IPC stock index jumped around 1 percent on a day when MSCI's emerging market index was nearly flat. Shares of auto parts maker Nemak SAB de CV were the biggest gainer, while its controlling shareholder Alfa SAB de CV advanced nearly 5 percent. Optimism over the NAFTA talks outshone a cautious stance in broader emerging markets, where investors avoided higher- yielding but riskier bets ahead of a Federal Reserve policy statement that is expected to announce the first U.S. interest rate hike of the year. Higher U.S. rates could dampen demand for emerging market assets.

Key Latin American stock indexes and currencies at 1630 GMT:

Stock indexes Latest Daily YTD pct pct change

change

MSCI Emerging Markets 1,209.93 0 4.44 MSCI LatAm 3,039.78 0.94 6.48 Brazil Bovespa 84,582.97 0.5 10.71 Mexico IPC 47,528.12 0.96 -3.70 Chile IPSA 5,551.39 0.15 -0.24 Chile IGPA 27,822.06 0.12 -0.57 Argentina MerVal 32,177.01 1.19 7.02 Colombia IGBC 11,658.94 1.01 2.54 Currencies Latest Daily YTD pct pct change

change

Brazil real 3.2914 0.47 0.67 Mexico peso 18.5890 0.97 5.97 Chile peso 605.5 0.64 1.51 Colombia peso 2,846.74 0.82 4.75 Peru sol 3.257 0.25 -0.61 Argentina peso (interbank) 20.2700 -0.02 -8.24 Argentina peso (parallel) 20.95 0.10 -8.21

(Reporting by Bruno Federowski, editing by G Crosse)