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EMERGING MARKETS-Mexican peso slumps after U.S. sanctions, other Latam FX slide

Susan Mathew and Ambar Warrick

* U.S. sanctions Mexican firms over links to Venezuela * Brazil central bank hints at further easing * Brazil April economic activity plummets * Argentina's peso at new low as debt talks stall * Colombian economy shrinks 20% in April (Adds comment, updates to close) By Susan Mathew and Ambar Warrick June 18 (Reuters) - Mexico's peso slumped 2% on Thursday after the United States sanctioned Mexican firms over links to Venezuela, while most other Latin American currencies slid as economic data underscored the damage wrought by the novel coronavirus pandemic. Mexico's peso deepened session losses after Washington on Thursday imposed sanctions on Mexican companies and individuals and two oil tankers under a program meant to pressure the government of Venezuelan President Nicolas Maduro. Meanwhile, Mexico's finance minister said the pandemic has likely triggered Mexico's deepest economic contraction since the Great Depression. Mexican stocks were down 0.6%. Brazil's real weakened 2.3%, with data showing economic activity in the country slumped at a record pace in April to a 14-year low. Overnight, the central bank reduced Brazil's benchmark interest rate further into record-low territory while indicating that there was still some room for further "residual" trimming to tide the economy through the coronavirus. A growing number of analysts say the economic reality will force the bank's hand. This could spell more real weakness, given that record-low rates have already made it a less-lucrative investment destination. Brazilian stocks rose about 0.3%, lifted by financials and energy stocks, and outperformed world stocks , which were rattled by spiking COVID-19 cases in the United States and China, while data showed that U.S. jobless claims remained elevated. "Global equities will struggle to improve upon recent gains on a debatable V-shaped economic recovery, rising COVID-19 cases" and a wealth of geopolitical risks, said Edward Moya, senior market analyst at OANDA, New York. But Latin America equities could offset these losses through ongoing policy support and further economic recovery in the world's largest economies, said Oliver Jones, a senior markets economist at Capital Economics. Chilean stocks were flat, while the peso sank 2%. Colombia's peso was an outlier, up 0.3%, tracking a recovery in oil prices as a panel of OPEC and its allies met to review record oil supply cuts. But gains were limited as data showed coronavirus lockdowns squeezed Colombia's economy, contracting 20.06% in April versus the same month last year - its largest fall on record. Argentina's peso weakened to a record low and stocks sank 5.4% as the country's debt restructuring talks hit a roadblock, with the government determined not to cede further ground after making an improved offer and a key creditor group warning that negotiations had failed. Key Latin American stock indexes and currencies 1929 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 993.48 -0.11 MSCI LatAm 1913.23 -2.12 Brazil Bovespa 96055.66 0.53 Mexico IPC 37682.03 -0.57 Chile IPSA 3994.74 -0.05 Argentina MerVal 38258.19 -5.468 Colombia COLCAP 1140.43 0.1 Currencies Latest Daily % change Brazil real 5.3820 -2.28 Mexico peso 22.7747 -2.08 Chile peso 815.8 -2.35 Colombia peso 3749.48 -0.26 Peru sol 3.5207 -0.68 Argentina peso 69.7300 -0.07 (interbank) (Reporting by Ambar Warrick in Bengaluru; Editing by Dan Grebler and Jonathan Oatis)