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EMERGING MARKETS-Mexico's peso leads Latam FX lower while stocks sink

Susan Mathew and Ambar Warrick

* Mexican peso set for worst day since March 16 * Industrial production in Mexico falls 25% in April * Argentine stocks lead loses in equities * MSCI Latam equities index eyes worst day since late April (Adds details, updates prices) By Susan Mathew and Ambar Warrick June 11 (Reuters) - Mexico's peso was the biggest loser among Latin American currencies on Thursday, pushed lower by tumbling oil prices, with regional stocks falling in tow after the Federal Reserve's sobering assessment of a U.S. economic recovery. The dollar surged on safe-haven demand after the U.S. central bank said the impact of the coronavirus pandemic will be felt for years, quashing hopes of a quick recovery. It promised to keep pumping liquidity into markets, but expects the U.S. economy to shrink 6.5% this year. The Fed's outlook was a blow to markets that had touched three-month highs on hopes of a swift economic recovery through the scaling back of coronavirus-related curbs. Along with worries about a record build-up in U.S. crude inventories, oil prices slumped more than 6%, weighing on the currencies of crude exporters in emerging markets such as Mexico , Colombia and Russia. The Mexican peso was on track for its biggest daily drop in nearly three months. Data showed industrial output fell 25.1% in April from March and was 29.3% lower on a year-over-year basis. Mexican shares plunged nearly 4%, their biggest daily drop since late March. "Although this (data) may mark the bottom for industry, it will add pressure for policymakers to respond with additional stimulus measures to dig Mexico's economy out of this hole," Capital Economics said in a note, as the country faces its deepest recession in decades. The MSCI's index of regional stocks plunged more than 3%, tracking declines on Wall Street as fears of a second wave of coronavirus infections further rattled investors. The index was set for its worst day since mid-April, with Argentine stocks serving as the worst performers in the region with a more than 7% drop. Colombia's peso looked to post its sharpest percentage fall in almost three months. The country's main stock index skidded 4.6%, marking its worst session in more than two months, with shares of oil major Ecopetrol sliding more than 8%. Sliding copper prices weighed on Chile's peso, which weakened 1.9%. Chilean stocks retreated from three-month highs. Brazil's markets were closed for a holiday. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 990.56 -2.17 MSCI LatAm 1984.69 -3.35 Mexico IPC 36767.87 -3.92 Chile IPSA 3937.26 -3.12 Argentina MerVal 42962.29 -7.56 Colombia COLCAP 1124.17 -4.57 Currencies Latest Daily % change Mexico peso 22.6951 -3.69 Chile peso 787.3 -1.89 Colombia peso 3763.31 -2.48 Peru sol 3.4587 -0.98 Argentina peso 69.3100 -0.07 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Bernadette Baum and Paul Simao)