* Markets watching for further developments in Wuhan virus * Mexican peso marks best gain in nearly 3 months * Azul SA leads Brazil stocks higher (Adds details, updates prices) By Ambar Warrick Jan 28 (Reuters) - Latin American assets recovered on Tuesday as markets reassessed a steep sell-off in the previous session, driven by fears over the economic damage from the Chinese coronavirus. MSCI's index for Latin American currencies rose 0.7%, having lost nearly 1% in the prior session. Regional equities had marked their worst day in over five months on Monday. Amid ongoing efforts by the Chinese government to corral the spread of the virus, markets have been increasingly sensitive to the virus' rapidly increasing death toll and spread. "There's been some adjustment today. Part of the market is seeing yesterday's move as too exacerbated," said Wilson Ferrarezi, economist at TS Lombard. "Market players are currently watching for further developments, and how the Chinese authorities will handle the contagion." Mexico's peso saw its best gain against the dollar in nearly three months, as data showed the country posting its best trade surplus in more than 20 years in December. The signing of a trade pact between the United States, Mexico and Canada on Wednesday has also spread some optimism in Mexico, which has seen its economy flirt with recession over the past year. Brazil's real strengthened slightly against the dollar. Latin America's largest economy is expected to see an increase in outstanding public debt, the Treasury said. Brazil's record-low interest rate environment may also prompt the country to issue a benchmark bond with a maturity of more than 10 years. Chile's peso traded sideways. Prices of copper, the country's largest export, are expected to climb this year amid increased global demand and problems with supply, a Reuters poll showed. Sao Paulo stocks bounced back from their worst session in 10 months, with energy stocks serving as the biggest boost to the index. Brazilian airline Azul SA jumped 8%, to the top of the Bovespa index, as it hoped to sublease 53 Embraer E195 jets to Poland's LOT and U.S.-based Breeze Aviation Group. Mexican stocks recovered after marking their worst session in more than a year on Monday. The MSCI's index of regional equities jumped 2.2%, its best gain in nearly four weeks. Key Latin American stock indexes and currencies at 1911 GMT Stock indexes Latest Daily % change MSCI Emerging Markets 1101.88 -0.1 MSCI LatAm 2846.94 2.19 Brazil Bovespa 116479.97 1.75 Mexico IPC 44676.98 1.23 Chile IPSA 4570.44 0.19 Argentina MerVal 40683.70 2.725 Colombia COLCAP 1621.97 -0.12 Currencies Latest Daily % change Brazil real 4.1953 0.32 Mexico peso 18.7411 0.87 Chile peso 788.4 -0.10 Colombia peso 3391 0.23 Peru sol 3.338 -0.21 Argentina peso 60.1750 -0.01 (interbank) (Reporting by Ambar Warrick in Bengaluru; editing by Jonathan Oatis)
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