U.S. Markets closed

EMERGING MARKETS-Argentine peso, stocks recover after Lebac note auction

SAO PAULO/BUENOS AIRES, May 16 (Reuters) - Argentina's stock market and peso currency climbed on Wednesday after the central bank held a successful auction of its Lebac notes a day earlier, indicating the country had calmed investor jitters at least temporarily.

Late on Tuesday, Argentina's central bank sold 620.93 billion pesos ($26 billion) of short-term Lebac securities at its monthly auction, compared with about 616 billion pesos' worth of securities that matured. That came after the central bank raised the interest rate on the security to about 40 percent, up from 26.3 percent previously.

In recent weeks, the Argentine peso has deteriorated rapidly, spurring the nation to seek a financing agreement from the International Monetary Fund. On Monday, the currency fell some 6 percent, hitting an all-time low.

On Tuesday, however, the peso snapped a losing streak, closing up 3.73 percent after the central bank sold $791 million on the spot market.

On Wednesday, the rally continued after the Lebac auction, with the peso up 0.84 percent at 23.9 to the dollar in midday trade and the benchmark Merval index up 1.44 percent.

Still, the recovery remains fragile as weak fundamentals, Argentina's drought-hit soy harvest, and various other issues weigh. Futures contracts have the peso trading some 28.9 to the dollar at the end of the year.

"The government won the battle, but not the war," said Fausto Spotorno, director of research at Orlando Ferreres y Asociados in Buenos Aires.

Elsewhere in the region, Brazil's benchmark Bovespa index led gains, climbing some 1.77 percent by midday.

Among the reasons traders cited for the rise were expectations of further cuts in the nation's benchmark Selic rate, driven by weak economic growth figures revealed on Wednesday morning. The index was also supported by a flurry of positive corporate news reports and traders buying back into stocks that registered severe losses in recent days and weeks.

Education company Estacio Participacoes SA climbed some 9.6 percent after posting losses of at least 7 percent in two of the last three sessions.

State-run utility company Cia Energetica de Minas Gerais SA , known as Cemig, climbed 4.4 percent after the company posted solid quarterly results, and announced new developments in its plans to sell telecommunications assets and a transmission unit.

Key Latin American stock indexes and currencies at 1507 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1154.43 0.36 -0.71 MSCI LatAm 2827.92 0.96 -0.96 Brazil Bovespa 86641.07 1.77 13.40 Mexico IPC 46345.77 0.19 -6.10 Chile IPSA 5722.80 0.21 2.84 Chile IGPA 28941.79 0.27 3.43 Argentina MerVal 31119.91 1.44 3.51 Colombia IGBC 12481.31 -1.02 9.77 Venezuela IBC 21267.16 3.39 1583.67 Currencies daily % YTD % change change Latest Brazil real 3.6837 -0.64 -10.06 Mexico peso 19.7100 -0.06 -0.06 Chile peso 630.35 0.31 -2.49 Colombia peso 2871.85 0.08 3.84 Peru sol 3.267 0.18 -0.92 Argentina peso 23.9000 0.84 -22.18 (interbank) Argentina peso 24.5 1.22 -21.51 (parallel) (Reporting by Gram Slattery in Sao Paulo and Walter Bianchi in Buenos Aires; Editing by Tom Brown)