EMERGING MARKETS-LatAm markets gain as weaker oil, dollar lift risk appetite

By Ragini Mathur

Nov 2 (Reuters) - Most Latin American currencies and stocks gained on Monday, supported by a weaker dollar and a sharp drop in oil prices, as signs of possible de-escalation in the Middle East improved appetite for riskier assets.

Trading was subdued, however, with stock markets in Brazil, Colombia and Mexico shut for public holidays. MSCI's Latin American currency index .MILA00000CUS rose 0.2%, while its regional equities index .MILA00000PUS gained 0.6%.

The move marked a modest recovery after Latin American assets endured steep losses last month amid a broader global risk-off selloff and a sharp decline in Brazilian markets following President Luiz Inacio Lula da Silva's re-election.

Global sentiment improved after talks between Iranian and Qatari officials on ending the US-Israeli war with Iran raised hopes that Middle East supply disruptions could ease. Iran's president also said the country's supreme leader had granted the government "certain authorities" regarding peace talks.

Oil prices fell about 6%, while the dollar slipped 0.4% against a basket of major currencies after touching a one-month low earlier in the session.

Investors were also looking ahead to Tuesday's US midterm elections, which will determine whether Democrats can take control of Congress from President Donald Trump's Republican Party.

Democrats are widely expected to win the House of Representatives, while control of the Senate remains less certain.

"A Republican sweep remains the main tail risk for the dollar, and we would likely see a rally as investors brace for more tax cuts, greater spending, a wider deficit and renewed fears over Fed independence," said Enrique Díaz-Alvarez, chief economist at Ebury.

Peruvian stocks .MIPE00000PUS climbed 1.8%, while the sol strengthened 0.2%. Gold, one of Peru's key exports, rose more than 1% after falling to a one-year low in the previous session.

Data published on Sunday showed Peru's consumer prices rose 0.57% in October, the biggest monthly increase for the month in more than four years.

Chile's equities .MMXIPSAGC gained 1.2% and the peso rose 0.9%, tracking higher copper prices. Copper is Chile's main export.

Separately, Chile's economic activity increased 0.2% year-on-year in September, above forecasts, as growth in non-mining sectors offset a decline in mining output, central bank data showed.

Argentina's peso weakened 0.6%.

Economists expect the country's economy to have slipped into recession in the third quarter, a potential test of voter patience ahead of the October 2027 presidential election, when President Javier Milei is widely expected to seek a second term.

Focus later in the week will turn to Brazil's central bank, which is expected to hold its benchmark interest rate steady on Wednesday after a series of cuts, as policymakers assess the economic outlook following October's presidential election.

The decision follows recent monetary policy meetings in Colombia and Chile.