(Updates prices) SAO PAULO, May 9 (Reuters) - Argentina's MerVal stocks index shot higher on Wednesday, just a day after the government said it had initiated financing talks with the International Monetary Fund that are likely to "take weeks." After a volatile period for Argentina's peso currency and the MerVal on Tuesday, President Mauricio Macri announced Latin America's third largest economy would seek a financing deal with the IMF to stabilize the economy.
A weakening peso had spurred the central bank to the raise the benchmark interest rate some 1,275 basis points since April 27. The MerVal had fallen some 12 percent over the last 12 sessions.
On Wednesday, Argentina's Cabinet chief, Marcos Pena, said that financing negotiations with the IMF would take "weeks," and he urged Argentines not to be afraid of the fund.
Shortly afterwards, the Treasury Ministry said Argentina will request a "stand-by" financing arrangement with the IMF, with negotiations likely to take up to six weeks.
Market participants viewed a potential IMF deal as positive, while warning that the move is unusual given that the fund usually makes such deals with less economically frenetic countries.
"In general, flexible credit lines have been given to countries with a solid track record when its comes to inflation and fiscal accounts," said Jorge Mariscal, emerging markets chief investment officer at UBS Global Wealth Management.
"If Argentina gets any help from the IMF, it would increase the odds of successfully navigating the current turbulence and allow the Macri administration to deepen the reform process." Argentina's Merval rose about 6 percent on Wednesday, while the peso closed down just under 0.5 percent.
Mexico's IPC equities index fell 0.91 percent as traders said spirits were subdued by reports the United States had rejected Mexico's latest auto sector proposal during North American Free Trade Agreement negotiations.
In currency markets, Brazil's real weakened 0.74 percent after central bank President Ilan Goldfajn gave a dovish speech that boosted bets on a Selic rate cut next week.
"With the speech of the central bank president, bets on a new 25-basis-point cut to the Selic rate should gain steam," brokerage Renascença Corretora wrote in a note to clients.
Key Latin American stock indexes and currencies at 2111 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1143.85 0.1 -1.36 MSCI LatAm 2821.22 0.84 -1.08 Brazil Bovespa 84435.22 1.78 10.51 Mexico IPC 46360.71 -0.77 -6.07 Chile IPSA 5664.20 0.34 1.79 Chile IGPA 28569.87 0.44 2.11 Argentina MerVal 27768.66 5.68 -7.64 Colombia IGBC 12444.94 0.97 9.45 Venezuela IBC 17737.73 1.07 -44.05 Currencies daily % YTD % change change Latest Brazil real 3.5940 -0.74 -7.81 Mexico peso 19.5850 -0.05 0.58 Chile peso 633.31 0.09 -2.95 Colombia peso 2863 0.26 4.16 Peru sol 3.295 -0.21 -1.76 Argentina peso 22.6800 -0.35 -17.99 (interbank) Argentina peso 23.05 -1.52 -16.57 (parallel) (Reporting by Gram Slattery; additional reporting by Rodrigo Campos in New York and Miguel Angel Gutiérrez in Mexico City; Editing by Lisa Shumaker)