EMERGING MARKETS-Latam stocks fall on Brazil weakness, currencies mixed after US data

* U.S. inflation rose in-line with expectations * Brazil's Ambev falls after Q4 profit miss * Argentina economy chief: No talks underway over new IMF program * Stocks down 0.5%, FX flat (Updated at 3pm ET/2000 GMT) By Shashwat Chauhan Feb 29 (Reuters) - Latin American currencies were mixed on Thursday, as investors digested a widely anticipated U.S. inflation reading, while stocks in the region lost ground on weakness in Brazilian shares. MSCI's basket of Latin American stocks dropped 0.3% as Brazil's main stock index fell 1%, weighed on by losses in financial and energy stocks. Mexican shares advanced 0.4%, while Colombian stocks fell 0.7%. MSCI's gauge for Latin American currencies was flat. It was on track to rise 0.3% in February. Brazil's real was flat at 4.9673 per dollar after data showed the country's unemployment rate for the first quarter came in below market expectations, with the closely watched average wages metric up 3.8% year-on-year. "The behavior of real wages reinforces our call that services disinflationary process will remain sticky, narrowing room for Selic rate cuts with a 10% terminal rate," Citi economists wrote in a note. Brazil's central bank cut benchmark interest rates for the fifth consecutive time to 11.25% in January. The dollar index weakened after data showed U.S. price pressures picked up in January about in line with expectations, keeping a June interest rate cut from the Federal Reserve in play. "Inflation continues to moderate despite upgraded outlooks for the U.S. economy ... today's numbers show just enough softening to keep worries at bay," David Russell, global head of market strategy at TradeStation said. The Latin American stocks index was on pace to lose 0.6% in February after volatile trading on regional bourses through the month as investors reassessed expectations for Fed rate cuts. Latin American stocks in February lagged MSCI's broader emerging markets stock index, which clocked monthly gains of 4.6% as gains in technology stocks and moves by Chinese policymakers to shore up the world's second largest economy lifted sentiment. On the day, the Mexican peso rose 0.3% and was on track to be the best monthly performing currency amongst local peers. Data showed Mexico's seasonally adjusted unemployment rate stood at 2.8% in January. Higher copper prices helped top producer Chile's peso rise 1%, though it was on track to lose nearly 4% in Feb. Chile's SQM rose nearly 3% after the world's second largest-lithium producer said it expects steady prices of the metal in the coming months. Argentinian stocks gained 1.2% while the peso on informal parallel market traded at 1010 to the dollar. The country's economy minister denied reports that talks were underway on a new loan deal with the International Monetary Fund, Argentina's largest debtor. HIGHLIGHTS ** India's economy grows at its fastest pace in six quarters in election boost for Modi Key Latin American stock indexes and currencies at 2000 GMT: Latest Daily % change MSCI Emerging Markets 1020.38 0.16 MSCI LatAm 2519.69 -0.49 Brazil Bovespa 128734.25 -1.09 Mexico IPC 55561.80 0.38 Chile IPSA 6449.88 1.66 Argentina MerVal 1011202.41 1.238 Colombia COLCAP 1276.65 -0.69 Currencies Latest Daily % change Brazil real 4.9711 0.00 Mexico peso 17.0482 0.24 Chile peso 965.5 1.06 Colombia peso 3923.6 -0.02 Peru sol 3.7683 0.40 Argentina peso 842.3000 -0.06 (interbank) Argentina peso 1010 3.47 (parallel) (Reporting by Shashwat Chauhan and Lisa Mattackal in Bengaluru; Editing by Chizu Nomiyama and Marguerita Choy)