Updates to mid-session trading

By Avinash P, Purvi Agarwal and Johann M Cherian

May 21 (Reuters) - Latin American assets edged higher on Thursday as investors assessed Middle East developments, while Turkish assets suffered heavy losses after the country's courts effectively ousted the main opposition leader in congress.

The U.S. and Iran stuck to directly opposing stances over Tehran's uranium stockpile and controls on the Strait of Hormuz, complicating negotiations to end the war. However, risk appetite was buoyed by expectations for a permanent end to conflict after U.S. President Donald Trump touted the possibility several times earlier this week.

Crude oil prices were volatile and last down 2%, although at $103 a barrel, they did little to ebb inflation worries that have prompted markets to bet on interest-rate hikes by central banks globally.

News of the supreme leader's stance shattered hopes of progress in peace talks, said Chris Beauchamp, chief market analyst at IG.

"Weeks of this lie ahead, potentially months, but Hormuz remains closed, a ticking time bomb underneath the global economy," he said.

MEXICO FACES ANOTHER CREDIT DOWNGRADE

Mexican hard-currency bonds were steady, while local stocks .MXX lost 0.5% after Moody's downgraded the country's credit rating, saying weaker fiscal anchors and conflicting priorities were undermining its policy credibility.

Earlier this month, S&P revised Mexico's outlook to "negative" from "stable", citing the risk of slow fiscal consolidation due to weak economic growth.

The moves come ahead of negotiations between the U.S. and Mexico next week, as part of a review for the U.S.-Mexico-Canada free-trade agreement. Uncertainty around the outcome of the negotiations loomed over markets.

The local peso MXN= reversed earlier declines and firmed 0.2%. Investors mulled minutes from the central bank's latest meeting that showed the decision was split as policymakers offered differing views on the impact of the Middle East conflict on the economy.

Turkish stocks .XU100 slid 6%, triggering a market-wide circuit breaker, while the nation's sovereign bonds sold off as much as 1.4 cents on the dollar US900123CG37=TE, US900123AY60=TE, which for many was the biggest fall since late March.

U.S.-listed iShares MSCI exchange traded fund tracking Turkish stocks TUR.O lost more than 9% to hit its lowest since early January, with about 1.2 million shares trading.

One of the country's top courts annulled the 2023 congress of the main opposition Republican People's Party in which its current chairman, Ozgur Ozel, was elected.

The move could further fracture the opposition, boosting President Tayyip Erdogan's chances of extending his more than two-decade rule.

MSCI's index tracking LatAm stocks .MILA00000PUS rose 0.7%, while the currencies gauge .MILA00000CUS climbed 0.1%.

Brazil's real BRL= firmed 0.1%, while its stocks .BVSP added 0.2%.

A major catalyst for LatAm's biggest economy is October's presidential election in Brazil. President Luiz Inacio Lula da Silva has taken the lead over Senator Flavio Bolsonaro, months after they were statistically tied.

Bolsonaro is seeking a meeting with Trump, two people familiar with the matter said, as the presidential hopeful looks to turn the page on news of his ties to a scandal-hit banker.

Colombia's equities .COLCAP gained 0.6%, while its peso COP= appreciated 0.9%. Focus will be on crucial elections scheduled for next week.

Elsewhere, Bolivian President Rodrigo Paz said he would shuffle his cabinet in response to weeks of protests against austerity measures and the cost of living in the country.

Key Latin American stock indexes and currencies at 1848 GMT:

Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1678.77	2.53
MSCI LatAm .MILA00000PUS	3083.56	0.71
Brazil Bovespa .BVSP	177750.69	0.22
Mexico IPC .MXX	68561.29	-0.48
Chile IPSA .SPIPSA	10599.69	2.4
Argentina MerVal .MERV	2855465.53	2.4
Colombia COLCAP .COLCAP	2103.65	0.66

Currencies	Latest	Daily % change
Brazil real BRL=	4.9928	0.1
Mexico peso MXN=	17.2744	0.19
Chile peso CLP=	899	-0.17
Colombia peso COP=	3682.48	0.89
Peru sol PEN=	3.4075	0.12
Argentina peso (interbank) ARS=RASL	1,389.5	0.57
Argentina peso (parallel) ARSB=	1,405.0	1.75