* Most Latam stocks gain
    * Brazilian bank stocks drop after report of higher taxes
    * Real nonplussed by central bank intervention

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    March 2 (Reuters) - Brazil's real sank to a four-month low
on Tuesday after government action to curb fuel prices raised
concerns over a shift to populist policies, while other Latin
American currencies remained on edge over high bond yields. 
    The real plunged 1.4% after President Jair
Bolsonaro said he would issue a decree on Tuesday suspending a
tax on diesel fuel, a move aimed at placating truckers who had
threatened to strike.
    Sources also told Reuters the government would instead hike
taxes on banks' net income to about 23% from 20% to offset lost
revenue.
    Shares in some of the country's biggest banks, such as Itau
Unibanco, Bradesco and Banco Santander
Brasil, lost between 0.1% and 1%, while the Bovespa
stock index was subdued, having touched a more than
three-month low in the session. 
    Brazil's central bank intervened in the spot foreign
exchange market for the fifth time in four days on Tuesday to
support the currency, which was last trading at 5.68 per dollar.
 
    Fears of populist policy measures have risen since Bolsonaro
ousted state-run oil company Petrobras' chief
executive in February over disagreements on fuel prices, and
threatened to interfere in other sectors of the
economy.
    "The overall news flow since last week has not be conducive
for a positive price action in (Brazil) markets," said Latam
strategists at Citi Research. 
    "Investor optimism will remain suppressed after the
government's meddling to prevent a rise in fuel prices, and the
potential dilution of compensatory measures in the emergency
bill. Thus, we have a negative bias for asset prices in the
short-term."
    Brazil's government is considering extending an emergency
coronavirus aid program amid worries of breaching the
government's spending cap - an issue that has weighed on
Brazilian assets.
    Concerns over a local variant of the coronavirus have also
undercut Brazilian assets recently, with scientists warning that
it can re-infect people who have previously recovered from the
disease.
    Most other currencies in Latin America fell against a steady
to higher dollar, in line with broader emerging market peers as
concerns over spiking bond yields persisted.
    Chile's peso dropped 0.9%, while Colombia's peso
 shed 1%. 
    Emerging market stocks and bonds saw foreign net inflows of
about $31.2 billion in February, though rising U.S. interest
rates triggered a slowdown during the last week, data from the
Institute of International Finance showed on Tuesday.

    Still, other Latam stocks recovered from recent losses, with
equities still being seen as most primed to benefit from an
economic recovery this year. 
    
    Key Latin American stock indexes and currencies: 
    
                              Latest       Daily % change
 MSCI Emerging Markets         1362.23                 -0.02
                                        
 MSCI LatAm                    2225.75                 -0.46
                                        
 Brazil Bovespa              110191.37                 -0.13
                                        
 Mexico IPC                   45722.51                  2.09
                                        
 Chile IPSA                    4706.93                   1.5
                                        
 Argentina MerVal             48144.56                -1.738
                                        
 Colombia COLCAP               1350.41                 -0.39 Currencies             Latest       Daily % change
 Brazil real                    5.6817                 -1.42
                                        
 Mexico peso                   20.6375                  0.01
                                        
 Chile peso                      728.7                 -0.93
                                        
 Colombia peso                  3654.5                 -1.00
 Peru sol                       3.6657                 -0.27
                                        
 Argentina peso                90.1500                 -0.07
 (interbank)                            
                                        
 
 (Reporting by Susan Mathew and Aaron Saldanha in Bengaluru;
Editing by Jane Merriman and Jonathan Oatis)
  

    * Drop in U.S. yields helps risk assets
    * Brazil stocks recover from worst day in 10 months
    * Mexican peso rises for first time in 7 sessions

 (Adds details, updates prices)
    By Susan Mathew
    Feb 23 (Reuters) - Brazil shares rose on Tuesday as oil
major Petrobras bounced back from a bruising sell-off, with most
Latin American assets recovering from a slew of recent losses as
pressure from high U.S. yields eased. 
    The Bovespa stock index rose 2.1% after a near 5%
slide on Monday, as shares in Petroleo Brasileiro
recovered 10% from a 22% plunge that wiped out 71 billion reais
($13 billion) in market value. 
    Petrobras' board is set to meet on Tuesday to rule on
Brazilian President Jair Bolsonaro's appointment of former
Defense Minister Joaquim Silva e Luna to helm the state-run
firm.
    "Bolsonaro's decision to replace Petrobras' CEO is dashing
hopes of Brazil's return to economic orthodoxy," said
strategists at BCA Research. Analysts broadly note that the
president is adopting populist policies instead of fiscal
consolidation ahead of elections 20 months down the line.
    "The central bank is likely to lift the policy rate in
response... which would keep government borrowing costs above
the nominal GDP growth rate," they said. "A violation of the
fiscal spending rule would weigh further on the real amid higher
inflation expectations, and bonds are likely to underperform as
rates rise." 
    The real rose 0.3% after marking its worst
session in a month on Monday, while dollar bonds and the cost to
insure exposure to Brazil's sovereign debt steadied following
dramatic falls on Monday.
    Charts show that Brazil's weighting is declining in the main
JPMorgan EM bonds index.   
    A recent spike in U.S. treasury yields had weighed on
risk-driven assets, particularly emerging market bonds and
currencies, as investors sought safer investment paths. Latin
American assets fell the most among their peers.
    But yields dropped on Tuesday after Federal Reserve Chairman
Jerome Powell said the economy still needed central bank
support.
    "One reason for Latam FX struggles may be that markets
expect that an inflation overshoot in the U.S. would spill over
to other economies, and would be harder to contain in Latam,
where central bank credibility is perceived to be weaker," said
Ilya Gofshteyn, senior EM macro strategist at Standard
Chartered.
    Mexico's peso rose for the first time in seven days
against a stronger dollar. The peso lost 3.7% over the last six
days on concerns about factory activity as fuel supply from
Texas was impacted by a deep freeze.
    Chile's peso, which has outperformed its regional
peers thanks to strength in the copper price, extended gains
into an eight consecutive session. 
    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1393.90             -0.27
                                        
 MSCI LatAm                    2330.32              2.07
                                        
 Brazil Bovespa              114975.20              2.05
                                        
 Mexico IPC                   45274.80              0.73
                                        
 Chile IPSA                    4506.23             -1.38
                                        
 Argentina MerVal             47672.85            -3.239
                                        
 Colombia COLCAP               1351.21             -0.07 Currencies             Latest     Daily % change
 Brazil real                    5.4380              0.30
                                        
 Mexico peso                   20.5595              0.75
                                        
 Chile peso                      705.4              0.14
                                        
 Colombia peso                 3583.72              0.20
 Peru sol                       3.6517              0.00
                                        
 Argentina peso                89.5300             -0.10
 (interbank)                            
                                        
 
    
 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru,
graphic by Marc Jones in London; Editing by Nick Macfie and
Rosalba O'Brien)