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EMERGING MARKETS-Latam assets recover from recent losses, Petrobras rebound supports stocks

    * Drop in U.S. yields helps risk assets
    * Brazil stocks recover from worst day in 10 months
    * Mexican peso rises for first time in 7 sessions

 (Adds details, updates prices)
    By Susan Mathew
    Feb 23 (Reuters) - Brazil shares rose on Tuesday as oil
major Petrobras bounced back from a bruising sell-off, with most
Latin American assets recovering from a slew of recent losses as
pressure from high U.S. yields eased. 
    The Bovespa stock index rose 2.1% after a near 5%
slide on Monday, as shares in Petroleo Brasileiro
recovered 10% from a 22% plunge that wiped out 71 billion reais
($13 billion) in market value. 
    Petrobras' board is set to meet on Tuesday to rule on
Brazilian President Jair Bolsonaro's appointment of former
Defense Minister Joaquim Silva e Luna to helm the state-run
firm.
    "Bolsonaro's decision to replace Petrobras' CEO is dashing
hopes of Brazil's return to economic orthodoxy," said
strategists at BCA Research. Analysts broadly note that the
president is adopting populist policies instead of fiscal
consolidation ahead of elections 20 months down the line.
    "The central bank is likely to lift the policy rate in
response... which would keep government borrowing costs above
the nominal GDP growth rate," they said. "A violation of the
fiscal spending rule would weigh further on the real amid higher
inflation expectations, and bonds are likely to underperform as
rates rise." 
    The real rose 0.3% after marking its worst
session in a month on Monday, while dollar bonds and the cost to
insure exposure to Brazil's sovereign debt steadied following
dramatic falls on Monday.
    Charts show that Brazil's weighting is declining in the main
JPMorgan EM bonds index.   
    A recent spike in U.S. treasury yields had weighed on
risk-driven assets, particularly emerging market bonds and
currencies, as investors sought safer investment paths. Latin
American assets fell the most among their peers.
    But yields dropped on Tuesday after Federal Reserve Chairman
Jerome Powell said the economy still needed central bank
support.
    "One reason for Latam FX struggles may be that markets
expect that an inflation overshoot in the U.S. would spill over
to other economies, and would be harder to contain in Latam,
where central bank credibility is perceived to be weaker," said
Ilya Gofshteyn, senior EM macro strategist at Standard
Chartered.
    Mexico's peso rose for the first time in seven days
against a stronger dollar. The peso lost 3.7% over the last six
days on concerns about factory activity as fuel supply from
Texas was impacted by a deep freeze.
    Chile's peso, which has outperformed its regional
peers thanks to strength in the copper price, extended gains
into an eight consecutive session. 
    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1393.90             -0.27
                                        
 MSCI LatAm                    2330.32              2.07
                                        
 Brazil Bovespa              114975.20              2.05
                                        
 Mexico IPC                   45274.80              0.73
                                        
 Chile IPSA                    4506.23             -1.38
                                        
 Argentina MerVal             47672.85            -3.239
                                        
 Colombia COLCAP               1351.21             -0.07 Currencies             Latest     Daily % change
 Brazil real                    5.4380              0.30
                                        
 Mexico peso                   20.5595              0.75
                                        
 Chile peso                      705.4              0.14
                                        
 Colombia peso                 3583.72              0.20
 Peru sol                       3.6517              0.00
                                        
 Argentina peso                89.5300             -0.10
 (interbank)                            
                                        
 
    
 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru,
graphic by Marc Jones in London; Editing by Nick Macfie and
Rosalba O'Brien)
  
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