* Stocks recover from 16-year low * Mexican peso bounces back from record low * Stocks, FX still substantially down for the month (Adds details on rally, updates prices) By Ambar Warrick and Susan Mathew March 24 (Reuters) - Latin American stocks shot up on Tuesday, joining a broader rally in risk assets as investors hoped for recent stimulus measures to provide a degree of stability, although the outlook remained bleak on the virus pandemic. Regional stocks found their footing as Wall Street indexes jumped on signs the U.S. Senate is nearing a deal on a $2 trillion economic rescue package. Brazil shares surged 10%, recovering from their worst close since 2017. MSCI's index of regional stocks climbed from 16-year lows. Mexican equities rose more than 5%, while Chilean stocks were flat. However, the day's gains were a fraction of what has been lost over a month-long rout, as fears of the pandemic prompted a mad dash for safe havens. The MSCI stock index is down roughly 37% in March so far and is set for its worst monthly loss ever. Regional currencies slightly capitalized on weakness in the dollar after the U.S. Federal Reserve committed to buy an unlimited number of bonds. The Mexican peso came off a record low, while Brazil's real and Chile's peso both strengthened. "Essentially, markets are trading in 'capital preservation' rather than 'capital appreciation' mode," said Christian Lawrence, senior market strategist at Rabobank. "The sell-off in EM currencies isn’t just a case of EM weakness, however, dollar strength has played a significant role as the greenback has gained ground against just about everything globally." Brazil's real, which had been steadily hitting new lows even before the outbreak due to flailing fundamentals, has losses of almost 21% so far this year. It is one of the worst-performing among commonly watched emerging market currencies, outdone by oil exporter Russia's ruble and Mexico's peso. Mexico's currency hit yet another all-time low of 25.444 during Asian hours but recovered some ground, putting it on track for its first day of gains in 10. The pandemic has also pushed currencies of Colombia and Chile to lifetime lows recently as oil and copper prices have tanked. Rising oil prices on Tuesday helped crude producer Colombia's currency rise 1.6%. Late on Monday, its central bank said it could buy $2.94 bln in debt to boost liquidity. For the day, MSCI's index of Latin American currencies rose slightly from its weakest close in four years. Argentine markets were closed for a holiday. Key Latin American stock indexes and currencies at 1950 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 803.55 5.98 MSCI LatAm 1507.82 9.03 Brazil Bovespa 70316.20 10.61 Mexico IPC 34731.01 5.36 Chile IPSA 2894.74 -0.11 Colombia COLCAP 913.62 -0.65 Currencies Latest Daily % change Brazil real 5.0863 0.97 Mexico peso 24.9204 1.68 Chile peso 845.2 1.81 Colombia peso 4109.88 1.66 Peru sol 3.5188 0.37 (Reporting by Susan Mathew in Bengaluru; Editing by Dan Grebler)
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