EMERGING MARKETS-LatAm FX, stocks retreat as investors weigh local data; Argentine peso climbs

By Pranav Kashyap and Ragini Mathur

Feb 12 (Reuters) - Most Latin American currencies and stocks fell on Thursday, with the broader currency index pulling back from the record high level it touched earlier in the session, as investors sifted through a busy week of local data and political headlines.

The MSCI Latin American currency index .MILA00000CUS slipped 0.2% after touching an intraday record high, while the region's equity benchmark .MILA00000PUS fell 1.3%.

Bucking the downward trend, the Argentine peso ARS=RASL jumped 0.6% after the Senate approved President Javier Milei's flagship labor reform bill, an important step forward for the libertarian leader's broader push to reshape the economy.

"Overall, a very welcome progress and agenda to look out for. To make progress in that regard means there is in general appetite for potential further adjustments and that can bode very well to improve the credit outlook for Argentina," said Alejandro Cuadrado, EM/Latin America strategist and global head of FX at BBVA.

However, Buenos Aires stocks .MERV were down 5.3%, along with other major share indexes.

In Peru, stocks .MXNUAMPESCPGPE fell 2.4%, while the sol PEN= was flat in thin trade.

The central bank is expected to hold rates at 4.25%. Peru heads into the decision with inflation well contained through 2025, after a strong year in markets where the sol gained roughly 10%, while stocks surged 45%.

Brazil, meanwhile, is starting to show signs that its long-hot economy is finally cooling. Services activity fell more than expected in December, pressured by still-sky-high interest rates at 15%.

The real BRL= fell 0.4%, and the stocks .BVSP were 1% down.

This week brought inflation prints from Mexico, Brazil, and Argentina. The results were mixed, but the takeaway for markets was the resilience in the region's economies, with nothing in the numbers setting off alarm bells.

Analysts say Latin American markets are also benefiting from a broader shift away from expensive U.S. tech stocks toward cheaper, overlooked opportunities.

"Latin America in that sense is in a relatively good place in terms of both valuations and drivers—less conflict, right out of the immediate scope of potential geopolitical tensions... So the region overall is definitely attracting capital, inflows," Cuadrado said.

Markets in oil exporters Colombia and Mexico saw weakness as crude prices tumbled 2%. The Colombian peso COP= and stocks .COLCAP dropped 0.1% and 2.1%, respectively, while Mexico's peso MXN= fell 0.3% with stocks .MXX down 0.8%.

In Chile, the world's largest copper producer, the peso CLP= declined 0.7% and stocks .SPIPSA traded 2.2% lower as copper prices weakened.

Further afield, Zambia's kwacha ZMW= touched its strongest level in more than two and a half years, albeit in thin volumes.

The move came after the country formally requested a new IMF program. A team from the lender is expected to visit February 25 to March 4, Zambia's treasury secretary told Reuters on Wednesday.

Key Latin American stock indexes and currencies: