Chile peso reverses early losses, stocks slip

SANTIAGO, July 31 (Reuters) - Chile's peso recovered from early losses on Thursday to close higher, while stock indexes followed global markets lower.

The peso CHILJ CLP=CL strengthened 0.45 percent to end at 504.00/504.50 per dollar from Wednesday's close at 506.30/506.80.

The peso fell sharply against the dollar in early trade after the Chilean government reported weaker-than-expected unemployment data and a drop in industrial output, which later triggered profit-taking on the dollar's gains.

"Without a doubt the market overreacted to the data, and then others stepped in to take advantage of the situation," one trader said.

The central bank continued with its daily purchases of $50 million as part of an $8 billion currency intervention program begun in April after the dollar fell to around 430 per dollar. The dollar peaked briefly above 530 pesos at the end of June.

Stock indexes traded lower in afternoon trade, affected by losses on global bourses and uninspiring local economic data.

The all-market IGPA index .IGPA edged 0.12 lower percent to 14,307 while the blue-chip IPSA .IPSA slipped 0.16 percent to 3,006.

"I think the local market is reacting to weakness in global markets, especially Wall Street," said Rodrigo Martin, head of research with brokerage Banchile. "Weak economic data published today added some pressure too."

Losses were led by retailers, with regional giants Falabella FAL.SN slumping 3.48 percent and Cencosud CEN.SN slipping 0.72 percent.

Wood pulp producers also retreated, with Copec COP.SN, down 0.72 percent and CMPC CAR.SN falling 1.76 percent.

LAN Airlines LAN.SN (LFL.N) helped offset blue-chip losses as its shares rose 3.14 percent. LAN reported second-quarter earnings rose 10.7 percent on Tuesday, beating analyst estimates.

Blue-chip losses outnumbered advances 2 to 1 in afternoon trade. (Writing by Lisa Yulkowski; Editing by James Dalgleish)