EMERGING MARKETS-LatAm assets pull back as Iran peace hopes dim, US inflation data weighs

By Purvi Agarwal, Avinash P and Johann M Cherian

May 12 (Reuters) - Most Latin American currencies weakened on Tuesday as the dollar firmed after U.S. economic data showed inflation accelerated in the month before, while stocks slipped on waning peace prospects in the Middle East that dampened risk appetite.

Data showed U.S. consumer inflation increased further in April, with the annual rate posting its largest gain in three years, bolstering expectations that 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 strengthened 0.3% following the report and pressured most regional currencies. The MSCI index tracking LatAm currencies .MILA00000CUS hovered near a record high, while the gauge tracking stocks .MILA00000PUS fell 0.5%, touching a one-week low.

Mexico's peso MXN= depreciated the most against the dollar, slipping 0.2%, while Colombia's peso COP= dipped 0.4% and hit its weakest level in nearly two months. The Brazilian real BRL= 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, fueled by higher oil prices that weighed on the outlook for global economic growth.

Chilean equities .SPIPSA fell 0.5% to their lowest levels in more than a month, marking their fourth session of losses.

Brazilian stocks benchmark .BVSP declined 0.7% and hit over a one-month low, largely bogged down by a 1.5% fall in state-run oil firm Petrobras PETR4.SA, which reported a drop in its first-quarter net profit.

Losses were capped by a 27% jump in petrochemical producer Braskem BRKM5.SA following a rating upgrade by J.P.Morgan, and a 10.4% advance in healthcare firm Hapvida HAPV3.SA after it beat first-quarter earnings estimates.

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 month, but left its June meeting open. Policymakers at Mexico's Banxico signaled an end to their easing cycle with a similar reduction last week.

MSCI's benchmark for Peruvian stocks .MIPE00000PUS were the only outlier, up 1.7%.

Conservative Keiko Fujimori and leftist Roberto Sanchez were leading the vote count in the final stretch of Peru's first-round April presidential election, with 99.76% of ballots tallied as of Tuesday, according to electoral authorities.

The political ambiguity has been an overhang on financial markets, which have reacted nervously to Sanchez amid concerns about greater state control over resources.

Argentina's peso ARS=RASL firmed 0.6%. The country's risk hit its lowest level since the beginning of February, as confidence in the government's ability to pay back its debt grew, triggering talks about whether it was time for the South American country to return to international capital markets.