* Mexican peso extends gains to third straight session * Peruvian sol stabilizes after hitting record lows * Brazilian retail sales surge in April (Adds details, bullets, updates prices throughout) By Susan Mathew and Shreyashi Sanyal June 8 (Reuters) - Mexico's peso extended gains on Tuesday as sweeping changes to market-friendly policies seemed less likely following mid-term elections, while the Peruvian sol stabilized after falling to fresh record lows. The Mexican peso extended gains to a third straight session as the make-up of the lower house of the Congress following Sunday's elections is seen as less conducive to President Andres Manuel Lopez Obrador's agenda. Markets were especially worried about constitutional changes impacting the energy sector and independent entities. "The main source of surprise in Sunday's election was (the ruling party) MORENA's low vote count, relative to pre-election polls ... This, we think, should be interpreted as a hidden rejection vote towards the ruling party by Mexican voters," Credit Suisse strategists wrote in a note. The currency is up about 1% for the year thanks to a rally since Friday. Peru's sol was flat after falling another 1% earlier in the session to new lows following a presidential election on Sunday. Socialist candidate Pedro Castillo held a slight lead over right-wing rival Keiko Fujimori with 95% of the votes counted. Fujimori alleged "irregularities" in the counting on Monday. The currency has lost almost 8% since Castillo's surprise win in the first round vote in April. Ratings agency S&P on Tuesday said it's too early to assess the fallout from election uncertainty. Castillo on Monday sought to assuage markets, saying he would respect the central bank's autonomy should he be elected. A spilt vote could be a silver lining as it would make it difficult for Castillo to pass dramatic reforms, analysts say. "As per article 116 of the Peruvian constitution, the next president of Peru takes office on 28 July, 2021. Therefore, we would expect that any legal challenges would need to be addressed and resolved before that date," Credit Suisse said. Chile's peso dipped 0.1%. Data on Tuesday showed Chile's consumer prices rose 0.3% in May, while rolling 12-month inflation hit 3.6%, within the central bank's target range of 2% to 4%. Brazil's real continued to pull back after hitting six-month highs last week. Data on Tuesday showed Brazilian retail sales rose in April at their fastest rate in more than 20 years, kicking off Latin America's largest economy's second quarter on a strong footing. Consumer stocks, Via Varejo, Lojas Americanas and Magazine Luiza were among the top gainers on Sao Paulo's Bovespa index after the data. Key Latin American stock indexes and currencies at 1918 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1376.73 -0.28 MSCI LatAm 2670.63 -0.56 Brazil Bovespa 129484.05 -0.99 Mexico IPC 50944.56 -0.94 Chile IPSA 4158.47 0.66 Argentina MerVal 66328.40 -2.675 Colombia COLCAP 1253.48 0.65 Currencies Latest Daily % change Brazil real 5.0342 0.07 Mexico peso 19.7137 0.43 Chile peso 717.3 -0.20 Colombia peso 3592.35 0.36 Peru sol 3.9248 0.30 Argentina peso (interbank) 95.0100 -0.03 Argentina peso (parallel) 153 2.61 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Alistair Bell and Paul Simao)
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