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EMERGING MARKETS-Latam FX gains against softer dollar as Fed rate cut hopes boosted

By Aaron Saldanha

(Recasts throughout; updates prices, adds market strategist's quote) By Aaron Saldanha June 3 (Reuters) - Most Latin American currencies firmed on Monday against a dollar weakened by dovish comments from a Federal Reserve official, while a Latin American stocks benchmark marked time as broad regional gains were tempered by losses among Brazilian shares. St. Louis Federal Reserve President James Bullard aided sentiment towards developing world assets, saying lower U.S. borrowing costs "may be warranted soon" given the rising risk to economic growth posed by factors including global trade tensions. The stance marks a stark departure from 2018, when a slew of U.S. rate hikes raised returns on holding dollars, playing a significant part in an exodus of capital from emerging markets. MSCI's index of Latin American currencies ticked higher, while its Latin American stocks index dipped 0.1%, weighed on by shares of Brazilian firms on the benchmark. Brazil's real firmed 0.7%, also helped by the head of the central bank saying it will focus on an agenda of 'micro' measures and initiatives to boost credit and lending. The Bovespa fell 0.5%, weighed down by losses among materials and consumer staples. A representative of a leading Brazil-based beef exporter confirmed on Monday that the country's agriculture ministry has suspended beef exports to China after a case of mad cow was reported. Shares of JBS SA, the world's largest meat-packer, dropped 3.2%. Marfrig Global Foods fell 3.3%, while Minerva SA slid almost 5%. Miner Vale SA fell 1%, with Dalian-traded iron ore futures having slid 3.5% earlier in the global day. Petroleo Brasileiro SA's (Petrobras) common and preferred shares rose 2% and 1.5%, respectively, shaking off pressure from lower Brent crude futures. The state-run oil firm said it is looking to divest two sets of onshore oil and gas assets. While Mexican stocks gained 1%, the peso was conspicuous in its weakness, softening 1.3%. Yields on local, 10-year bonds held at 8.08%, around Friday's closing level, which was a more than one-week closing peak. U.S. President Donald Trump's threat to impose tariffs on Mexico prompted further skittishness on the part of investors in Latin America's No.2 economy, coming at a time when state-owned oil firm Petroleos Mexicanos (Pemex) is financially ailing. "The current overall economic strategy could be better in the sense that it (Mexico) could take advantage of the achievements of the past 25 years on the macro front and focus on the micro challenges instead," Federico Kaune, head of emerging markets fixed income at UBS Asset Management, told the Reuters Global Markets Forum. "Pemex needs a substantial overhaul and financial resources; it is not clear either is likely to happen without weakening the fiscal situation of the sovereign." Argentina's stocks declined 1.3%, while the peso softened. Latin American stock indexes and currencies at 1900 GMT Stock indexes daily Latest % change MSCI Emerging Markets 1,008.68 1.07 MSCI LatAm 2,681.80 -0.07 Brazil Bovespa 96,547.62 -0.5 Mexico IPC 43,185.46 1.02 Chile IPSA 5,011.49 0.69 Argentina MerVal 33,512.32 -1.29 Currencies daily % Latest change Brazil real 3.8977 0.64 Mexico peso 19.8723 -1.31 Chile peso 701.6 1.07 Peru sol 3.36 0.62 Argentina peso (interbank) 44.8500 -0.22 (Reporting by Aaron Saldanha in Bengaluru and Michael Connor in New York Editing by James Dalgleish)