(Updates prices) By Miguel Gutierrez and Bruno Federowski MEXICO CITY/SAO PAULO, Jan 26 (Reuters) - The Mexican peso and stock exchange weakened on Thursday after President Enrique Pena Nieto pulled out of a meeting in Washington with U.S. counterpart Donald Trump in a deepening spat over a border wall and trade disputes.

The peso ended the day down 0.62 percent, having fallen as much as 1.7 percent during the session, while Mexico's benchmark IPC stock index lost 1.38 percent, bucking a four-session winning streak.

A long-brewing spat between the world's No. 1 economy and its southern neighbor moved up a gear on Wednesday, when Pena Nieto wrote on Twitter that he was cancelling the planned meeting with Trump in Washington next week.

He was responding to an earlier tweet from Trump who said it would be better for the Mexican leader not to come if Mexico would not pay for a wall along the U.S.' southwest border.

Trump later presented the scrapped plan as a mutual agreement.

In a further twist, the White House said later on Thursday that Trump could pay for the highly divisive wall with a new 20 percent tax on goods from Mexico.

But the U.S. president's office later walked it back, saying it was not endorsing the border adjustment tax and that it was merely an example of a way of making Mexico pay up. No further details were available.

Mexican miner Grupo Mexico drove losses in the IPC index, losing 3.78 percent.

In Brazil, after a local holiday, the Bovespa index gained for the fourth successive session, lifting the index above 66,000 points for the first time in nearly five years as banking shares surged.

The real weakened 0.28 percent against the dollar.

Key Latin American stock indexes and currencies at 2311 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 916.73 0.5 6.32 MSCI LatAm 2532.58 -0.2 8.2 Brazil Bovespa 66190.62 0.53 9.90 Mexico IPC 47611.44 -1.38 4.31 Chile IPSA 4311.39 0.36 3.85 Chile IGPA 21467.57 0.13 3.54 Argentina MerVal 19180.40 -1.16 13.37 Colombia IGBC 10262.68 0.58 1.33 Venezuela IBC 27867.67 -1.64 91.03 Currencies daily % YTD % change change Latest Brazil real 3.1805 -0.28 24.49 Mexico peso 18.3200 21.21 -2.367 (Reporting by Bruno Federowski; Editing by Bernadette Baum and Sandra Maler)