Updates to mid-session trading

By Johann M Cherian and Purvi Agarwal

Feb 21 (Reuters) - Investors sold Latin American currencies and stocks on Friday, after two separate sets of data out of the U.S. and Mexico raised doubts about the health of their respective economies.

MSCI's index tracking Latin American currencies .MILA00000CUS dipped 0.4% against the dollar, although advances made earlier in the week set the index on track for its seventh week of gains, its longest weekly winning streak since October 2010.

The stocks gauge .MILA00000PUS fell 2.4% lower, and was set for its biggest one-day drop since November, with bourses in Brazil .BVSP and Peru .SPBLPGPT falling 0.7% and 1.5%, respectively.

S&P Global's survey showed U.S. business activity nearly stalled in February, with the dominant services sector contracting for the first time since January 2023, on fears over U.S. President Donald Trump's policies regarding tariffs and deep cuts in federal government spending.

Wall Street's main indexes .SPX, .IXIC, .DJI declined by over 1% each and were poised for weekly declines.

Further dampening the mood, data out of Mexico showed Latam's second largest economy shrank in the fourth quarter, the first time in more than three years.

Mexican stocks .MXX fell 1.2% and the peso MXN= weakened 0.5%, while bonds MX5YT=RR, <MX10YT=RR> MX30YT=RR gained between 0.6 and 1.5 pesos.

"Going forward, real activity is likely to face headwinds from post-election policy uncertainty, negative fiscal impulse, and soft business confidence," analysts at Goldman Sachs said in a note.

Brazil's real BRL= declined. The country's monetary policy director, Nilton David, said the local central bank is convinced that monetary policy is more restrictive than normal given its guidance for an upcoming interest rate hike, and will adjust it as needed going forward.

A drop in crude prices weighed on oil exporter Colombia's peso COP=, while copper exporter Peru's sol PEN= depreciated 0.4% tracking lower prices of the red metal.

Investors also weighed the potential implications on global trade if President Trump followed through on his threats regarding tariffs on semiconductor chips and automobiles, among other products.

On the geopolitical front, Trump's envoy met Ukraine's president on Thursday, but there was no immediate word on whether their talks had helped smooth over an unprecedented wartime rift between the once firm allies. Russia and the U.S. held talks in Riyadh earlier this week that excluded Ukraine.

Meanwhile, Reuters reported that Russia could agree to using $300 billion of sovereign assets frozen in Europe for reconstruction in Ukraine.

Another report said Ukraine and U.S. negotiators are looking to finalize a deal on critical minerals.

Ukraine's GDP warrants XS1303929894=TE and bonds XS2895057334=TE, XS2895057177=TE broadly added more than 2 cents to the dollar each, bouncing from declines earlier in the week.

BofA Global Research showed that outflows from emerging market equity funds stood at $5.3 billion this week.

Key Latin American stock indexes and currencies at 1956 GMT:

(Reporting by Purvi Agarwal and Johann M Cherian in Bengaluru; Editing by Paul Simao and Marguerita Choy)

((Purvi.Agarwal@thomsonreuters.com;))