EMERGING MARKETS-Latam assets gain broadly on trade optimism; Brazil stocks at peak after data

By Pranav Kashyap and Purvi Agarwal

May 27 (Reuters) - Most Latin American assets advanced on Tuesday, in-line with global sentiment on trade optimism, with Brazil's benchmark hitting an all-time high after a batch of inflation data.

Brazil's stock index .BVSP hit a record high and was last up 1%, after data showed inflation decelerated more sharply than anticipated in the month to mid-May.

This marks the third consecutive deceleration, a testament to the bite of tight monetary policy, with benchmark interest rates at their highest levels in nearly two decades.

"The fall ... increases the probability of a hold. Much hinges on the first-quarter GDP figures out on Friday," said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

Top players including Eletrobras ELET6.SA and Petrobras PETR3.SA gained about 1% each.

The Brazilian real BRL= rose 0.4% against the U.S. dollar. The central bank held an up to $1 billion auction with a repurchase agreement.

Argentina's peso ARS= reversed gains to fall more than 1%, while international bonds firmed. The stocks .MERV dipped 0.9%, after rising 1% in the previous session.

Argentina announced a $1 billion domestic five-year bond on Monday, structured to attract international investors, who will subscribe in U.S. dollars and receive coupon payments and principal in Argentine pesos.

Investor confidence in Argentine assets has been on a steady incline, particularly after the nation secured a $20 billion loan program with the International Monetary Fund in April.

Argentina has also dismantled significant currency and capital controls, permitting the peso to fluctuate more freely within a managed band.

These moves are central to libertarian President Javier Milei's agenda, who has aimed to lure back international investors and extricate the nation from a deep-seated economic crisis, ahead of the legislative elections due in October.

MSCI's gauge for the region's equities .MILA00000PUS jumped 0.8% to its highest level since September, while an index for currencies .MILA00000CUS ticked up 0.1%.

In Mexico, the peso MXN= reversed early gains to fall slightly and the local stock market .MXX gained 0.2%. The nation prepares for its first judicial elections this Sunday, where voters will select federal judges and magistrate roles, a slate that includes all Supreme Court justice positions.

"The impact of this profound structural reform is difficult to predict... However, the consequences could weigh on investment decisions in the medium term, at least until there is clarity of the consequences of the implementation of the new judiciary power," said analysts at Citigroup.

A broader wave of positive sentiment buoyed Latin America, relating to U.S. President Donald Trump's announcement of a postponed deadline for threatened tariffs on the European Union.

The region's currencies also caught a tailwind from a weakening U.S. dollar as concerns lingered regarding Trump's proposed sweeping tax and spending bill, now navigating the Senate, and its potential to swell the already mounting debt burden of the world's largest economy.

The dollar index =USD was heading for a fifth straight month of declines against a basket of currencies, which would mark the longest such losing streak since 2017. FRX/

Elsewhere in the region, the Chilean peso CLP= rose 0.2% and the Colombian peso COP= advanced 1.1% to its highest level in more than a month.

Key Latin American stock indexes and currencies: