EMERGING MARKETS-LatAm markets cheer cooler US CPI; stock index hits five-week high

By Pranav Kashyap

Aug 12 (Reuters) - Latin American assets advanced Tuesday as a milder U.S. inflation print buoyed sentiment, lifting a regional stock index to its highest level in over a month and nudging currencies higher.

An index tracking Latin American currencies .MILA00000CUS rose 0.5%, while a similar gauge for stocks .MILA00000PUS jumped 1.6%.

U.S. consumer prices rose moderately in July, but tariff-driven goods costs pushed a key underlying gauge to its biggest gain in six months.

The report did not derail September cut expectations from the Federal Reserve, which have buoyed emerging markets since a weak jobs print triggered a swift repricing.

With tentative signs of tariff‑driven inflation under U.S. President Donald Trump, markets were still on alert for producer prices on Wednesday. The Fed's trajectory — still the world's fulcrum — will steer EM policy paths.

"July CPI delivered a mild relief rally ... but with tariffs in play, investors should enjoy the calm while keeping an eye on the horizon," said Gina Bolvin, president of Bolvin Wealth Management Group.

Brazilian equities .BVSP surged 1.6% to their highest since July 9, after July inflation undershot forecasts, with cheaper food offering monthly relief even as the annual pace stayed well above target.

After delivering 450 bps of hikes, Brazil's central bank hit pause in late July, leaving rates hovering near a two‑decade high near 15% in its battle against stubborn inflation.

Brazil's real BRL= rose 0.6%, trading at its highest level in nearly six weeks.

"The fall in Brazilian inflation won't change the outcome of the central bank's next meeting in September," said Kimberley Sperrfechter, emerging markets economist at Capital Economics.

"But it lends support to our view that they will start to ease monetary policy around the turn of the year and that rates will ultimately be lowered by more than most expect next year."

On a larger front, investors also cheered the extension of the tariff truce between the U.S. and China. The extension by another 90 days staved off triple-digit duties on Chinese exports to the United States.

Meanwhile, Argentina was due to report its inflation figures on Wednesday, with a Reuters poll showing that monthly inflation was seen to be slightly up.

Stocks in Buenos Aires .MERV rose 0.69%, while the Argentine peso ARS= gained 0.3%.

Colombia executed a $2.96 billion bond buyback, cutting interest outlays by about $28 million this year and $135 million in 2026. Stocks in Bogota .COLCAP slipped 0.2%, while the peso COP= gained 0.3%.

Other Latin American currencies also gained between 0.3% and 0.7%.

In Asia, India's retail inflation dropped to 1.55% in July, slipping below the central bank's comfort zone for the first time in eight years.

Key Latin American stock indexes and currencies: