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EMERGING MARKETS-Brazil stocks drag Latam lower; focus turns to U.S. Fed

By Ambar Warrick

(Updates prices, analyst comment) By Ambar Warrick Sept 13 (Reuters) - Brazilian stocks edged lower on Friday after several strong sessions as investors braced for key monetary policy decisions from the U.S. Federal Reserve, although most markets were set for weekly gains on easing U.S.-China trade tensions. Emerging market assets have benefited this week from increased risk appetite after Washington and Beijing officials made concessions on retaliatory tariffs, while the European Central Bank cut interest rates and promised more stimulus. However, the mood soured somewhat on Friday as investors scaled back expectations for aggressive policy easing by the U.S. Federal Reserve next week following better-than-expected economic data. "The market has taken back a lot of their easing expectations, and I think that's overall negative for EM," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman. MSCI's index of Latin American stocks declined 1% but was set to add about 0.3% for the week, its third straight week of gains. Brazil's Sao Paolo index fell 1%, with consumer discretionary stocks weighing the most as investors locked in profits after gaining in the past six of eight sessions. The index was set to gain 0.4% this week, hovering just below record-high levels. Brazil's central bank is widely expected to cut its record-low rates by 50 basis points next week in order to shore up Latin America's largest economy. "The (Brazilian) economy is still very sluggish compared to where it should be and inflation is low, so I think the central bank is under pressure to ease," Thin added, noting that a total 1% cut by the bank may be likely this year, which would hurt the real. The Brazilian real fell 0.7%, and was set for its worst week since late-August. Mexican stocks rose about 0.3%. President Andres Manuel Lopez Obrador said on Friday that state oil company Pemex will consolidate its finances and "has a bright future", a day after the debt-ridden state oil firm carried out the biggest refinancing operation in its history. The Mexican peso fell 0.1%, and was set to gain 0.5% this week. Chilean stocks rose 0.6% and were set for an eighth straight gaining session, recovering from a more than two-year low touched late-August. The Chilean peso rose for a second straight day, tracking a recovery in the prices of copper, the country's top export. Argentine equities rose about 4% and were set to gain more than 9% for the week as lower stock valuations attracted bargain buying after a crash in August. Latin American stock indexes and currencies at 1926 GMT Stock indexes Daily % change Latest MSCI Emerging Markets 1026.63 0.42 MSCI LatAm 2689.25 -1.03 Brazil Bovespa 103336.41 -0.99 Mexico IPC 42800.66 0.31 Chile IPSA 5005.40 0.62 Argentina MerVal 30236.28 3.852 Colombia IGBC 12792.69 -0.8 Currencies Daily % change Latest Brazil real 4.0881 -0.71 Mexico peso 19.4418 -0.06 Chile peso 707.85 0.16 Colombia peso 3361.45 0.05 Peru sol 3.321 0.09 Argentina peso 56.0900 0.05 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Cynthia Osterman)