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EMERGING MARKETS-Latam FX claw higher, stocks suffer worst week since financial crisis

Shreyashi Sanyal and Susan Mathew

financial crisis@

* MSCI's Latam stocks index sheds 20%

* Major currencies step off record lows

* Brazil stocks jump as much as 15.4%

(Adds comments, updates prices) March 13 (Reuters) - Latin American currencies rose on Friday, moving up from all-time lows as expectations of more central bank stimulus and government spending lifted the mood after worries over the coronavirus outbreak drove a brutal sell-off this week. As an increasing number of central banks across the globe made generous liquidity injections into markets and governments ramped up fiscal measures amid virus containment efforts, hopes of more policy moves helped support risk sentiment. A recovery in oil prices saw Colombia's peso rise 0.2%, while Mexico's peso gained 0.1%. A crash in crude prices on Monday set off alarm bells about its impact on emerging market economies. "Colombia will suffer from depressed investment and tighter fiscal policy," said William Jackson, chief emerging market economist at Capital Economics in London. "And while Mexico's economy is no longer a net oil exporter, concerns about the impact of low oil prices on Pemex's balance sheet have put the peso under pressure and caused bond spreads to widen," Jackson added. Pemex, Mexico's state-run oil firm Petroleos Mexicanos, is Latin America's most indebted firm and reported one of its worst-ever losses last year. MSCI's index for Latin American stocks jumped 8.5%, but lost 20.7% this week, its worst weekly fall since October 2008. Brazil's real, gave back gains from earlier in the session, to trade 0.6% lower against the dollar. Brazil will unveil measures in the next few days to combat the economic fallout from the virus, Economy Minister Paulo Guedes said on Friday, adding that all steps that don't affect the country's fiscal position would be considered. As copper prices rose, Chile's peso gained 1.3%.

Markets sold off this week on fears that measures to contain the pandemic will cause a significant economic slowdown in United States and Europe. On the week, Colombia's currency in on course for its worst performance since 2008, and the Mexican peso since late 2016.

All eyes are on the U.S. Federal Reserve's policy meeting next week with a 75-basis-point cut in the U.S. central bank's key overnight lending rate already priced in. With all of its companies gaining ground, Sao Paulo's Bovespa stock index surged as much as 15.4% before paring the gains to trade 7% higher. The index lost 14.8% on Thursday and is still on track to end the week around 20% lower - its sharpest fall since the 2008 global financial crisis.

Key Latin American stock indexes and currencies at 1835 GMT:

Stock indexes Latest Daily %

change

MSCI Emerging Markets 886.65 0.4MSCI LatAm 1826.04 8.48Brazil Bovespa 79354.65 9.33Mexico IPC 38035.42 3.82Chile IPSA 3784.81 1.53Argentina MerVal 28380.30 0.1Colombia COLCAP 1174.31 0Currencies Latest Daily %

change

Brazil real 4.8145 -0.63Mexico peso 21.9290 -0.13Chile peso 838.2 1.86Colombia peso 4021.13 0.12Peru sol 3.52 0.19Argentina peso 62.8975 -0.12

(interbank)

(Reporting by Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Paul Simao and Daniel Wallis)

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