* Brazil"s industrial output rises in October * Chile"s peso supported by strong copper prices * Brazil"s Vale sinks after iron ore production forecast (Updates prices throughout, adds comments) By Ambar Warrick and Shreyashi Sanyal Dec 2 (Reuters) - Brazil"s real and Mexico"s peso stepped back from recent gains on Wednesday in a sign that currency markets may have priced in positive developments on coronavirus vaccines, while Chile"s peso rose as elevated copper prices offset weak economic data. The real fell 0.3% against the dollar after surging more than 7% in November, while the Mexican peso dropped 0.2%. Markets made few gains on news that Britain had approved the Pfizer-BioNTech COVID-19 vaccine for emergency use, having already rallied through November on a series of positive vaccine updates, as well as U.S. political developments. But the prospect of vaccine rollouts and an eventual return to economic normality pointed to steady gains for risk-driven assets, particularly in emerging markets. Positive economic readings from Latam"s largest economies have also indicated the beginnings of an economic recovery in the region, improving prospects for regional markets. "Many EMs will likely benefit from strengthening capital inflows, improving external positions, USD weakness and low U.S. yields, which alongside vaccine rollout will provide a conducive environment for EM asset market gains," analysts at TD Securities wrote in a note. "Risks of over extended fiscal and monetary policy easing will need to be watched closely." Foreign investors poured a record $76.5 billion into emerging market portfolios in November, the Institute of International Finance said in a report on Tuesday. Chile"s peso rose 0.5%, shrugging off data on Tuesday that showed that Chile"s economic activity fell 1.2% in October from a year ago. Strong copper prices - which recently hit a seven-year high - supported the peso, given that the metal is Chile"s top export. Regional stock markets rose slightly, tracking strength in global equities as the prospect of fresh U.S. stimulus also aided risk-driven assets. Brazilian stocks rose 0.7% after data showed Brazil"s industrial output rose 1.1% in October from September. "The overall picture is that Brazil"s economy has fared reasonably well so far in the fourth quarter," said William Jackson, chief emerging markets economist at Capital Economics. "The most pressing risk to the outlook now is that the recent rise in COVID-19 cases trigger further containment measures, which hit activity over the next few months (at least until the distribution of vaccines)." Iron ore company Vale"s shares fell 2.2% after it said it expects to produce 315-335 million tonnes of iron ore in 2021 after producing 300-305 million tonnes this year, missing a previously lowered 2020 target of at least 310 million tonnes. Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1228.14 0.34 MSCI LatAm 2303.60 0.69 Brazil Bovespa 111584.73 0.70 Mexico IPC 43446.78 1.28 Chile IPSA 4157.21 1.13 Argentina MerVal 55502.90 1.074 Colombia COLCAP 1296.64 0.9 Currencies Latest Daily % change Brazil real 5.2449 -0.34 Mexico peso 20.0449 -0.13 Chile peso 755.7 0.49 Colombia peso 3523.37 0.66 Peru sol 3.6087 0.00 Argentina peso (interbank) 81.4800 -0.05 Argentina peso (parallel) 149 2.68 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru. Editing by Jane Merriman and Grant McCool)