* Brazil industrial output slumps more than expected * Real set for worst day in nearly a week * Mexican peso firms as inflation data improves * Global sentiment brightens on cooling U.S.-Iran tensions By Sagarika Jaisinghani and Ambar Warrick Jan 9 (Reuters) - The Brazilian real dipped on Thursday after data showed a sharper-than-expected slump in industrial production, but the Mexican peso rose for the second day and remained near an eight-month high on cooling U.S.-Iran tensions and better-than-expected inflation figures. The Brazilian real eased 0.4%, on course for its biggest daily decline in nearly a week. Data showed the country's factory output dropped 1.2% in November after rising for three months in a row. The currency was battered during 2019, partly due to Brazil's failed oil aucitons but the real ended with a strong month of December. Still, recent indicators from Latin America's largest economy remained mixed. The data "serves as a timely reminder that while we're getting a bit of optimism about the prospects of Brazil's economy this year, it's still a pretty slow and fragile recovery," said William Jackson, chief emerging markets economist at Capital Economics in London. A wider index of Latin American currencies was down 0.2%, with the Chilean peso easing 0.6% against a firmer dollar. But the Mexican peso rose for a second day, as data showed a 2.83% rise in consumer prices in the year through December, compared with a Reuters poll of 2.76%. Globally, investor sentiment brightened as the United States and Iran backed away from further military action. "With Iran now seemingly in the rearview mirror, (emerging market currencies) will be driven once more by hopes for a cyclical improvement outside of the U.S.," said Dirk Willer, Citigroup's global head of emerging market strategy. "While the case for that is still speculative, we believe hope will prevail at least early this year, and EMFX will trade well." Global equities drew support from news in Beijing that Vice Premier Liu He would sign a Phase 1 trade deal in Washington next week. In Latin America, Argentina's MerVal rose 0.8% in early trading, while Peruvian stocks added about 0.1%. Among individual stocks, shares in Brazilian meatpacker Marfrig jumped 4% after a report the company was preparing to launch a "vegan pork meat" product. Key Latin American stock indexes and currencies at 1459 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1129.63 1.64 MSCI LatAm 2916.93 -0.28 Brazil Bovespa 116001.73 -0.21 Mexico IPC 44488.90 0.04 Chile SPIPSA 4896.32 -0.27 Argentina MerVal 41358.05 0.834 Colombia Colcap 1654.21 -0.17 Currencies Latest Daily % change Brazil real 4.0775 -0.64 Mexico peso 18.7968 0.06 Chile peso 764.46 -0.88 Colombia peso 3251.91 -0.30 Peru sol 3.3188 -0.14 Argentina peso (interbank) 59.8150 - (Reporting by Sagarika Jaisinghani, Ambar Warrick and Medha Singh in Bengaluru; Editing by David Gregorio)
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