EMERGING MARKETS-Brazil stocks fall on investor caution on Fed

Reuters

* Brazil Bovespa falls 1.19 pct, Mexico IPC flat SAO PAULO, Dec 11 (Reuters) - Brazilian stocks sunk their most in over a week on Wednesday as investor caution over a potential reduction in monetary stimulus from the U.S. Federal Reserve led to a fall in the most heavily-weighted shares.

Mexico's IPC index was little changed, while Chile's bourse edged lower.

The U.S. Congress announced a provisional budget deal on Tuesday, which some investors expect will strengthen a view that the Fed may soon scale back its massive bond-buying program. The Fed's stimulus program has helped support global demand for riskier assets such as Latin American equities.

The Fed's next policy-setting meeting is scheduled to take place on Dec. 17 and 18.

Brazil's benchmark Bovespa stock index lost 1.19 percent to 50,384.52.

State-run oil company Petroleo Brasileiro SA, known as Petrobras, fell 1.4 percent, contributing most to the index's decline, while Itaú Unibanco Holding SA, Brazil's largest non-government bank, fell 1.8 percent. Both companies tend to attract a large share of foreign investors seeking exposure to local equities.

"It seems that there is little interest on the part of investors to take significant risks," said Gustavo Mendonca, an economist with Saga Capital in Rio de Janeiro.

Mexico's IPC index was nearly unchanged from Tuesday's close, hovering near 42,470 points.

Shares of telecommunications firm America Movil, controlled by billionaire Carlos Slim, rose 0.8 percent, while mining firm Grupo Mexico lost 1.5 percent.

Chile's IPSA index fell slightly as shares of Banco Santander Chile dropped 1.1 percent.

Latin America's key stock indexes at 1705 GMT: Stock indexes daily % YTD % Latest change change MSCI LatAm 3,195.75 -1.36 -14.69 Brazil Bovespa 50,384.52 -1.19 -17.34 Mexico IPC 42,466.94 -0.05 -2.83 Chile IPSA 3,703.11 -0.14 -13.91 Chile IGPA 18,265.12 -0.08 -13.31 Argentina MerVal 5,216.35 -0.15 82.75 Colombia IGBC 13,165.12 0.46 -10.54 Peru IGRA 15,012.81 -0.21 -27.23 Venezuela IBC 2,652,442.39 1.38 462.63

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