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EMERGING MARKETS-Argentine stocks outperform broader Latam after sovereign rating upgrade

Susan Mathew and Ambar Warrick

* Fitch follows S&P in upgrading Argentina's rating * Latam stocks fall tracking Wall Street * Peruvian central bank meeting in focus (Adds details, updates prices) By Susan Mathew and Ambar Warrick Sept 10 (Reuters) - Argentine stocks outperformed their peers on Thursday after ratings agency Fitch upgraded the country's sovereign rating, while broader Latin American stocks and currencies gave up early gains tracking volatility on Wall Street. The Merval stock index rose more than 1%, and was the sole gainer among its regional peers for the day. Argentine bonds also rose, with those maturing in 2028 up nearly 9%. Fitch was the second major agency to upgrade Argentina's sovereign rating after S&P earlier this week, citing completion of distressed debt exchanges on its foreign currency sovereign debt securities in both local and external markets. A risk indicator showed that investor perception of Argentine debt had improved since the successful restructuring of foreign and local sovereign bonds. Wall Street reacted to elevated weekly jobless claims numbers in the United States that underscored a tough economic recovery from the novel coronavirus pandemic. The MSCI's index of Latin American stocks fell 2%. Regional stocks face a long road to prepandemic levels because of increasing infection rates and middling economic data. Brazil's real traded flat after increased retail sales came in four times more than estimated on easing of coronavirus-induced lockdowns improving economic activity. Analysts warn that more pain may be in store for the real, which is among the worst performing emerging markets currencies so far this year, down about 24%. "Disagreements over various reform projects against the background of narrow fiscal and monetary policy leeway act as a burden. We therefore do not expect a stronger real until next year at the earliest and after the corona crisis has been priced out," wrote Commerzbank FX analysts Melanie Fischinger and You-Na Park-Heger in a note. Mexico's peso retreated from six-month highs, having almost reclaimed the entirety of its pandemic-induced losses. Peru's sol inched lower ahead of a central bank meeting on Thursday. Credit Suisse analysts expect the bank to hold the key interest rate at 0.25% until 2021. "The bank will likely underline that it considers appropriate to keep a strongly expansive monetary stance for a prolonged period," said CS analyst Alberto J. Rojas. Chile's peso edged lower. Analysts expect its central bank to hold the benchmark interest rate steady at 0.5% for at least the next 18 months and see the rate hitting 1% within two years. Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1084.41 -0.12 MSCI LatAm 1965.48 -1.95 Brazil Bovespa 99487.14 -1.78 Mexico IPC 36162.52 0.01 Chile IPSA 3687.83 -2.22 Argentina MerVal 47004.17 1.04 Colombia COLCAP 1223.58 -1.32 Currencies Latest Daily % change Brazil real 5.3109 -0.22 Mexico peso 21.4760 -0.58 Chile peso 772.4 -0.80 Colombia peso 3708.63 -0.09 Peru sol 3.5438 -0.20 Argentina peso 74.8300 -0.08 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Grant McCool)