EMERGING MARKETS-Latam FX lower, stocks drop as Ukraine peace hopes falter

By Purvi Agarwal

Aug 19 (Reuters) - Latin American currencies and stocks were mostly lower on Tuesday as investors weighed the implications of an EU-Ukraine-U.S. meeting on Monday, aimed at ending Russia's war in Ukraine.

U.S. President Donald Trump promised security guarantees for Kyiv, but provided no specifics at the summit on Monday. He also said on Tuesday Russia's Vladimir Putin may not want to make a deal at all and markets' initial optimism fizzled out.

Yet, the summit paved the way for a trilateral meeting between the U.S., Russia and Ukraine in the coming weeks.

Ukraine's dollar bonds gained at least 1 cent on the dollar, and the one maturing in 2029 XS2895055981=TE was up 1.25 cents.

"If we do get to a ceasefire and lasting peace in Ukraine, we could be in for a little relief rally for some European currencies and (a) fall in commodity prices," said Brad Bechtel, global head of FX at Jefferies.

"But the market is not really excited about jumping on these trades just yet as we still have a lot of work to do here."

In Latam, most currencies weakened against the dollar, with the Brazilian real BRL= down 0.8%.

Currencies in Mexico MXN= and Colombia's peso COP= depreciated 0.2% and 0.3% respectively, with falling oil prices also weighing on the latter. Chile's peso CLP= bucked the trend, gaining 0.4%.

Stocks in Bogota .COLCAP that were shut for a public holiday on Monday, were down 0.2%. Heavyweight Brazilian equities .BVSP were off 1.6%. Raizen RAIZ4.SA fell 7% after oil giant Petrobras PETR4.SA said it has no planned investments in the production or distribution of ethanol with the company.

Meanwhile, a Reuters poll found that Mexico's benchmark index .MXX was expected to reach 64,460 by 2026-end, with participants attributing it to diplomatic efforts to curb U.S. protectionist moves.

On the day, it was up 0.1% at 58,363, an outlier among peers.

MSCI's indexes tracking Latam currencies .MILA00000CUS and regional stocks .MILA00000PUS were down 0.6% and 1.5% respectively. Both indexes were set for their steepest one-day declines since July 28.

These assets have had a good month so far, as a swift repricing of interest rate cuts in the U.S. weighed on the dollar index, boosting the appeal of riskier assets.

This week, markets will be watching the U.S. Federal Reserve's annual Jackson Hole symposium for any further clues on a September rate cut, even as a quarter-point trim remains priced in despite mixed economic data recently.

Bolivia's dollar bonds rallied for a second day, with the one maturing in 2028 USP37878AC26=TE up 4.5 cents on the dollar.

Elsewhere, Israel's stocks .TA125 gained 0.7%, but the shekel ILS= was down 0.3%, after Hamas agreed to a ceasefire proposal on Monday. Israel was studying the response.

Kenya is exploring buying back maturing local bonds using proceeds from the corresponding sale of longer-dated bonds to manage maturities and ease the strain on public finances.

Key Latin American stock indexes and currencies: