EMERGING MARKETS-Stocks, currencies up on US data

* LatAm stocks, currencies up on U.S. bank, jobs data

* Mexico economy to shrink in third quarter-Carstens

* Appetite for risky emerging markets assets rises

By Manuela Badawy

NEW YORK, May 8 (Reuters) - Latin American stocks and
currencies firmed on Friday as results from U.S. government
stress tests on 19 big banks raised optimism and data showed
U.S. employers cut fewer jobs than expected in April.

Morgan Stanley Capital International's Latin American stock
index .MILA00000PUS rose 2.36 percent, while the MSCI
emerging markets stock index .MSCIEF rose 1.46 percent.

"It appeared that even the most recalcitrant on the theme
of market risk related to U.S. banks and their toxic asset
holdings are close to throwing in the towel after the results
of the stress tests were announced yesterday," said Enrique
Alvarez, head of Latin America strategy at IDEAglobal.

"The Federal Reserve has essentially given its seal of
approval to all the accounting magic that appears to have
occurred over recent weeks, which many interpreted as a sign of
impending return to 'back to normal' circumstances."

U.S. regulators told top banks after the close on Thursday
to raise $74.6 billion to build a capital cushion that
officials hope will restore faith in financial companies and
set a course out of the deepest recession in decades.

The return to risk is being reflected in the VIX volatility
index .VIX, known as Wall Street's main barometer of investor
fear. The index has fallen around 65 percent since early
October, after Lehman Brothers' implosion.

Emerging-market assets have benefited recently from a view
that the world economy may be turning a corner after the global
financial crisis of late 2008.

Brazil's Bovespa index .BVSP was up 1.37 percent, while
Mexico's IPC index .MXX rose 1.57 percent. Earlier this week
the IPC hit its highest since early October.

Argentina's MerVal index surged 4.4 percent, while
Chile's blue-chip stocks .IPSA traded up 2.41 percent.
Chile's all-market IGPA index .IGPA gained 1.97 percent.
Colombia's IGBC stock index .IGBC rose 2.44 percent while
Peru's stock exchange surged 5.59 percent.

Currencies also appreciated against the dollar, with the
Brazilian real (BRBY: Quote, Profile, Research) leading the rise by 1.75 percent to 2.072
per dollar. The currency firmed around 6.3 percent in April.

Mexico's peso MXN= rose 0.82 percent to 13.08 per dollar
on global optimism.

According to Finance Minister Agustin Carstens, Mexico's
economy will shrink in the third quarter from a year earlier
and might not grow again until the first quarter of 2010.

Speaking at the Reuters Latin American Investment Summit in
Mexico City on Friday, Carstens said Mexico's recession was
extending longer than expected. The country's economy is in
freefall because exports to the United States have collapsed.
For more see [ID:nN08479709].

Emerging sovereign debt spreads were flat at 466 basis
points over comparable U.S. Treasuries, according to JP
Morgan's Emerging Markets Bond Index Plus (EMBI+)
11EMJ.JPMEMBIPLUS.

Brazil's global bond due 2040 BRAGLB40=RR, considered the
emerging market benchmark paper, fell 0.688 percentage point to
bid 130.625 in price and yield 5.203 percent.

In other news, Ecuador's Finance Minister Maria Elsa Viteri
told Reuters the government does not plan to repeat its offer
to buy back its $3.2 billion in defaulted debt if investors
reject its current proposal.

She said investors were "best advised" to take part in the
offer before it ends on May 15. [ID:nL8991602]
(Editing by James Dalgleish)