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EMERGING MARKETS-U.S.-China trade deal hopes spark rally in Latam assets

By Susan Mathew

(Updates prices) By Susan Mathew Oct 11 (Reuters) - Mexico's peso hit a two-month high on Friday and Latin American stocks jumped nearly 2% as investors picked up risky assets after U.S.-China trade negotiators signalled that Beijing was open to a "partial" deal. The Mexican peso, vulnerable to trade risks due to its reliance on U.S. economy, jumped 0.8%, while the Chilean and the Colombian pesos rallied 1%, getting an extra boost from a rally in metal and oil prices. MSCI's index of emerging market currencies posted its biggest percentage gain in more than three months, rising 0.7%. On the week, the index clocked its best performance in a month. U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, ended a second day of talks in Washington on Friday and Bloomberg News reported the two sides had reached a partial agreement that would lay the groundwork for a broader deal. The surge in risk appetite and a rally in the pound on rising hopes of a Brexit deal pressured the dollar. "Optimism is likely to remain in place and we could start to see the outflows from safe havens help trigger a major emerging market rally," wrote Edward Moya, senior market analyst at OANDA New York in a note published after the trade talks concluded. "The bottom could be in place for the U.S. dollar, but traders will still require more concrete progress in trade de-escalations." CNN reported that Beijing has invited U.S. trade negotiators for further trade talks in China. Both sides have slapped duties on hundreds of billions of dollars of goods during the 15-month trade dispute, which has shaken financial markets and uprooted global supply chains. An index of Latin American stocks rallied, with Brazil's Bovepsa leading gains with a 2% rise. The Latam Index posted its second straight week of gains. The real, however, posted the least gains among its peers as data showed services sector activity fell in August more steeply than economists had expected, another indication that an economic recovery remained sluggish. Mexico's IPC index rose 0.8% after upbeat industrial output data. The finance ministry said that recent operations to reduce the debt burden of state oil company Pemex have refinanced liabilities worth $20.1 billion. Key Latin American stock indexes and currencies at 1923 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1014.54 1.81 MSCI LatAm 2709.20 1.99 Brazil Bovespa 103711.58 1.89 Mexico IPC 43251.53 0.75 Chile IPSA 5135.60 1.57 Argentina MerVal 32073.66 1.041 Colombia IGBC 12927.18 0.41 Currencies Latest Daily % change Brazil real 4.0907 0.79 Mexico peso 19.3085 0.68 Chile peso 710.45 1.05 Colombia peso 3425.7 0.93 Peru sol 3.355 0.30 Argentina peso 58.0300 -0.09 (interbank) (Reporting by Susan Mathew in Bengaluru Editing by Sonya Hepinstall)