EMERGING MARKETS-Brazil markets outperform in otherwise subdued Latam

By Susan Mathew

May 28 (Reuters) - Most Latin American stocks and currencies weakened on Tuesday amid the broader theme of lingering U.S-China trade tensions, while Brazil markets outperformed on reform hopes.

Mexico's peso MXN= fell 0.3%, while Chile's currency COP= dropped 0.7% to its lowest since the first quarter of 2016, as the dollar strengthened.

The Peruvian sol PEN= also fell 0.2% against a stronger dollar, while the Brazilian BRL= and Colombian COP= currencies eked out gains. FRX/

"It's not a pure Latam story today. It's about watching the dollar's move," said Christian Lawrence, senior market strategist at Rabobank. "I tend to think I would be a seller of most EM currencies this week."

The dollar index .DXY, which measure the greenback against a basket of six peers, was up 0.2% with trade tensions and weakness in the euro on Italian budget worries buoying the U.S. currency.

Most stock in Latin America slipped, with Colombian stocks .IGBC down more than a percent to a more than three-month low. State oil firm Ecopetrol ECO.CN slid 4.2% with oil prices trading mixed.

Mexican shares .MXX looked set to stretch losses to a sixth straight session.

Brazil stocks .BVSP touched a 2/1-2 week high, extending gains from Monday when they rose after a march over the weekend by supporters of President Jair Bolsonaro added pressure on Congress to pass reforms, such as those on the pension system, seen as essential to the economy.

"Sunday demonstrations in support of the government have helped bring a more optimistic climate to the market," said Régis Chinchilla, an analyst with Terra Investiments.

Banks led the rally, while petrochemicals producer Braskem SA BRKM5.SA was among the top gainers after its board approved an agreement with authorities to pay 410 million reais to settle its involvement in the 'Car Wash' corruption case.

Key Latin American stock indexes and currencies at 1444 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

988.80

-0.04

MSCI LatAm .MILA00000PUS

2610.63

0.08

Brazil Bovespa .BVSP

95417.90

0.58

Mexico IPC .MXX

42419.39

-0.17

Chile IPSA .SPCLXIPSA

4851.23

0.02

Argentina MerVal .MERV

35413.66

-0.1

Colombia IGBC .IGBC

11913.67

-1.15

Currencies

Latest

Daily % change

Brazil real BRBY

4.0209

0.35

Mexico peso MXN=D2

19.1303

-0.40

Chile peso CLP=CL

703.4

-0.70

Colombia peso COP=

3351.82

0.17

Peru sol PEN=PE

3.353

-0.03

Argentina peso (interbank) ARS=RASL

44.7800

0.49

(Reporting by Susan Mathew in Bengaluru and Stefani Inouye in Sao Paulo; Editing by Nick Zieminski)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130; Reuters Messaging: susan.mathew.thomsonreuters.com@reuters.net))

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