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EMERGING MARKETS-Latam stocks see worst day in over 1 month on growth worries

By Susan Mathew

(Adds fresh comment, updates prices) By Susan Mathew Oct 2 (Reuters) - Latin American stocks slumped on Wednesday, tracking a sell-off on Wall Street after more dismal economic data from the United States had deepened investors worries about the health of the world's largest economy. MSCI's index of Latam stocks fell 1.7% to their worst day since Aug 26 after a report on U.S. private sector hiring suggested that fallout from the U.S.-China trade war is hurting the U.S. economy. That followed a surprise fall in U.S. manufacturing on Tuesday that knocked sentiment across the globe. Shares in Mexico lost more than 1.6%, while those in Brazil sank nearly 3%, both being on course to post their worst session in 1-1/2 months. Mexico's economy had barely escaped recession in the first half of the year, and deteriorating economic indicators point to sustained weakness despite the central bank's assurances of a slight economic recovery for the rest of 2019. "We see downside risk to the consensus earnings growth expectations (in Mexico) in the light of deteriorating GDP growth dynamics," wrote analysts at UBS in a note pointing also to uncertainty over the ratification of the United States-Mexico-Canada trade deal. In Brazil, investors were also closely watching the pension reform as the Senate concludes its first round of voting on the bill later in the day. The main text of the bill was approved by the Senate on Tuesday but it rejected a key amendment in a move that dilutes its overall fiscal impact by 76 billion reais ($18 billion). Colombian shares fell to a three week low, while Chile stocks extended losses to a third straight session. Regional currencies, meanwhile, capitalized on the dollar's weakness. Mexico's peso broke a five-session losing streak and was up 0.16%. Mexico will soon unveil a set of major infrastructure projects drawn up by the private sector to lift the economy, President Andres Manuel Lopez Obrador said on Wednesday, as he sought to assuage recession concerns. Brazil's real was on-track for its best day in 3-1/2 weeks, up 0.6%. But UBS analysts warn of deterrents to a sustained rally in Brazil's real, citing low interest rates as being one that will persistently affect the currency. The central bank has cut interest rates twice this year and UBS' emerging market strategists Ronaldo Patah and Alejo Czerwonko expect another 50 basis points (bps) cut in October a 25-bps slash in December. "Even as the cost of country's credit default swaps is close to its lowest ever levels, the equilibrium of the currency has moved to a weaker level," they said. Argentina's peso extended gains to a fifth day, while Chile's currency firmed more than half a percent. Key Latin American stock indexes and currencies at 2009 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 989.54 -0.9 MSCI LatAm 2602.54 -1.66 Brazil Bovespa 101089.39 -2.85 Mexico IPC 42231.02 -1.64 Chile IPSA 5021.67 -0.42 Argentina MerVal 30741.53 2.246 Colombia IGBC 12758.01 -0.77 Currencies Latest Daily % change Brazil real 4.1336 -0.03 Mexico peso 19.8005 0.07 Chile peso 724.7 0.55 Colombia peso 3492.75 0.01 Peru sol 3.388 -0.06 Argentina peso 57.8200 -0.29 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Sandra Maler)