* Investors hope ECB to limit Spain, Italy bond yields
* Commodities, homebuilders support Brazil's bourse
* Brazil Bovespa gains 0.93 pct, Mexico IPC flat
By Asher Levine and Rachel Uranga
SAO PAULO/MEXICO CITY, Aug 21 (Reuters) - Latin American stocks gained o n T uesday as investors stepped up bets that the European Central Bank will soon take action to lower borrowing costs for troubled euro zone nations.
The MSCI Latin American stock index climbed for the first session in three, rising 0.48 percent to 3,687.15.
Homebuilders and commodities exporters drove Brazil's Bovespa to its second straight daily gain, flirting with a three-month high, while Mexico's bourse remained flat.
Shares tracked global markets higher as investors latched onto media reports the ECB was considering setting a hard limit on sovereign bond yields for Italy and Spain, though the ECB issued a statement on Mon day saying it is "misleading to report on decisions which have not yet been taken."
Still, market perception that policymakers would soon take more decisive action to solve the euro zone's debt crisis continued to support local equities.
"The foreign markets have been the focus of much turbulence, but there is a sensation that the worst is past us," said Fabio Cardoso, a partner with Adinvest Consultoria in Rio de Janeiro. "Volatility has decreased a bit and that has increased the appetite for risk."
Brazil's benchmark Bovespa stock index rose 0.93 percent to 59,834.90, slipping from above 60,000 points, a level the index has struggled to break this month.
Homebuilder Gafisa rose 7.18 percent, contributing most to the index's gains, while rival PDG Realty added 4.58 percent.
"Gains in the homebuilding sector are an important yardstick for the entry of foreign capital," said Hamilton Alves, a senior analyst with BB Investimentos in Sao Paulo. "Today we are clearly seeing foreign investors returning to the stock market."
Net foreign fund flows into the Bovespa totaled 2 billion reais in the month through August 17 as increasing risk appetite led investors to Brazil in search of higher returns. If the trend continues, August would be the first month with a net inflow of foreign funds since April.
"(The Bovespa) will be able to stay above 60,000 points but we will need the cooperation of foreign investors," Cardoso said. "We don't have enough savings here to support the market on our own."
State-controlled oil firm Petrobras erased early gains to lose 0.62 percent after Chief Executive Officer Maria das Gracas Foster said on Tu esday that the company is not negotiating with the government to raise fuel prices.
Mexico's IPC index index was little changed, as gains by mining firm Grupo Mexico helped offset losses by lender Grupo Financiero Banorte.
Shares of cement maker Cemex climbed 2.08 percent after the company said it was near completing a massive refinancing deal that will help it get a handle on $7.2 billion in debt maturing in 2014.
Latin America's key stock indexes at 1627 GMT: Stock indexes daily % yearly %
Latest change change MSCI LatAm 3,687.15 0.48 1.87
Brazil Bovespa 59,834.90 0.93 5.43
Mexico IPC 40,330.03 -0.05 8.77
Chile IPSA 4,266.45 -0.18 2.13
Chile IGPA 20,596.42 -0.15 2.32
Argentina MerVal 2,449.57 -0.42 -0.53
Colombia IGBC 14,259.82 0.10 12.59
Peru IGRA 20,380.05 1.36 4.66
Venezuela IBC 291,761.00 0.32 149.29
(Aditional reporting by Danielle Assalve in Sao Paulo; Editing by Dan Grebler)