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EMERGING MARKETS-LatAm ends October higher; Mexican peso hit by Fitch warning

By Susan Mathew Oct 31 (Reuters) - Most Latin American currencies lost ground against a strong dollar on Wednesday while stocks tracked a strong session on Wall Street, but both asset classes racked up a second straight month of gains in October as domestic drivers helped them outperform emerging markets elsewhere.

The MSCI index of Latin American stocks rose 3.4 percent in October, while the currency index gained 1.6 percent, in contrast to declines for the month for broader emerging market stock and currency.

Optimism over presidential elections in Brazil, an International Monetary Fund funding facility for recession-hit Argentina, and a new trade deal between Mexico, the United States and Canada shielded regional markets from concerns about global growth and trade that punished other emerging markets.

However, Mexican markets were most impacted among regional markets by global issues and fell in October. The peso was down around 8 percent for the month, and stocks clocked a monthly loss of 11 percent, with worries earlier in October on the North American Free Trade Agreement adding to the losses.

Even so, the currency was among the best performing currencies in the world this month.

On Wednesday, the peso was steady after earlier weakening against the dollar following a warning by credit agency Fitch that it could downgrade the country's debt rating. Fitch also revised Mexico's rating outlook to negative, citing concerns about the incoming government's policies.

Leftist President-elect Andres Manuel Lopez Obrador, who is to take office on Dec. 1, earlier this week canceled a partially built Mexico City airport in which billions of dollars have already been invested - a decision that sent the peso down more than 3.5 percent and stocks 4 percent lower.

Analysts say the next bout of volatility for the policy may stem from the new government's budget later this year.

Mexican stocks closed 0.9 percent higher on the day with recently battered shares of airport operators ASUR and GAP seeing some buying.

In Brazil, the real closed little changed on Wednesday after the central bank held interest rates at an all-time low, as widely expected. For the month, the currency strengthened by about 8 percent, boosted by the election of market-preferred presidential candidate Jair Bolsonaro. Sao Paulo's Bovespa stock index gained almost 10 percent in October.

The Argentine peso strengthened more than 2 percent on Wednesday, buoyed by month-end flows.

On the month it was the best performer, adding close to 15 percent as a $56.3 billion funding facility from the IMF and short-term debt sale by the central bank at sky-high rates plugged the currency's fall.

Key Latin American stock indexes and currencies at 2104 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 955.92 2.1 -17.48 MSCI LatAm 2,664.27 0.53 -5.79 Brazil Bovespa 87,423.55 0.62 14.43 Mexico IPC 43,942.55 0.93 -10.97 Chile IPSA 5,104.33 1.76 1.76 Argentina MerVal 29,491.11 0.22 -1.91 Colombia IGBC 12,393.78 -0.83 9.00 Currencies Latest Daily YTD pct pct change change Brazil real 3.7222 -0.04 -10.99 Mexico peso 20.3295 0.00 -3.10 Chile peso 696.5 -0.43 -11.75 Colombia peso 3215.13 0.00 -7.25 Peru sol 3.371 -0.30 -3.98 Argentina peso (interbank) 35.8500 2.48 -48.12 (Reporting by Susan Mathew in Bengaluru; Editing by Leslie Adler)