EMERGING MARKETS-LatAm assets pull back on waning Iran peace hopes, US inflation data

By Purvi Agarwal

May 12 (Reuters) - Most Latin American currencies fell against a stronger dollar on Tuesday after a U.S. inflation reading, while stocks were lower tracking a wave of caution as hopes of a U.S.-Iran peace deal faded.

Data showed U.S. consumer prices rose for a second straight month in April, resulting in the largest annual increase in inflation in nearly three years, bolstering expectations the Federal Reserve would keep interest rates unchanged for a while.

"The report was not hot enough to panic markets, but not soft enough to give the Fed much room to cut. Equities can look through one CPI print... but the bar for a dovish Fed pivot is higher," said Lale Akoner, global market strategist at eToro.

The dollar index =USD rose 0.4%, weighing on most regional currencies. The MSCI index tracking LatAm currencies .MILA00000CUS retreated 0.2% from a record high.

Chile's peso was hurt the most, down 0.2%. Currencies in Mexico MXN= and Brazil BRL= depreciated 0.4% and 0.3% respectively, while Colombia's peso COP= was flat.

Meanwhile, hopes for a peace deal with Iran dwindled after U.S. President Donald Trump said a ceasefire was "on life support" as Tehran rejected a U.S. proposal and stuck to a list of demands that Trump described as "garbage".

"Investors are starting to price in a breakdown of the fragile ceasefire. The question is whether a resumption of the war would speed up the reopening of the Strait of Hormuz, or if Iran maintains its control over this vital shipping chokehold," said David Morrison, senior market analyst at Trade Nation.

LatAm equities were swept up in a risk-off move across markets as oil prices edged higher and weighed on the outlook for global economic growth.

Chilean stocks .SPIPSA fell 0.7% to their lowest levels in over a month, in what would be their fourth session of losses.

Heavyweight Brazilian equities .BVSP, down 0.7%, were largely bogged down by a 1.4% fall in state-run oil firm Petrobras PETR4.SA which reported a drop in first-quarter net profit that also missed expectations.

An 18% surge in petrochemical producer Braskem BRKM5.SA after a JPMorgan rating upgrade and a 12.5% advance in healthcare firm Hapvida HAPV3.SA after it beat first-quarter earnings estimates, limited losses.

Data showed Brazil's inflation was in line with market expectations in April, with the 12-month rate remaining within the central bank's target range.

The country's central bank delivered an expected 25-basis-point cut at its meeting last week, but left its June meeting open, whereas policymakers at Mexico's Banxico signaled an end to their easing cycle with a similar reduction.

Colombian stocks .COLCAP were the only outliers, up 0.3%.

Key Latin American stock indexes and currencies: