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EMERGING MARKETS-Most Latam currencies weaken, Brazil's real hit by data

By Aaron Saldanha

(Recasts, updates prices, adds graphic, quote by fund manager) By Aaron Saldanha June 5 (Reuters) - Most Latin American currencies fell on Wednesday, with Brazil's real dipping on weak local data, while Mexico's peso bucked the trend on optimism over a deal to avert U.S. tariffs on Mexican goods. MSCI's Latin American stocks index dropped 0.7%, while its index of Latin American currencies fell as Brazil's real weakened 0.6% despite a weak dollar. Economic activity in Brazil shrank in May, IHS Markit's monthly purchasing managers index surveys showed, raising the risk the economy could be back in recession. Sao Paulo-traded equities fell 1%, weighed by losses across the board. Common shares and preferred shares of Petroleo Brasileiro SA (Petrobras) fell 0.4% and 0.6%, respectively, less than the 2.2% drop in Brent crude futures . The state-run oil firm expects to narrowly win a supreme court decision that would allow it to proceed with asset sales, according to two company sources involved in the case, freeing up billions of dollars. Vale SA fell 1.7%. The chief executive of Brazil's largest pension fund, Previ, told Reuters it will seek a gradual sale of Vale shares. Through a holding company, Previ and other state firms' pension funds collectively own about 20% of the mining giant, whose shares dived in January following a deadly dam burst. Banco do Brasil slid 2.1%. Chief Executive Rubem Novaes said there is "worry" about a potential bankruptcy filing by Odebrecht SA, adding the construction conglomerate owes the bank about 9 billion reais ($2.32 billion). Mexico's peso strengthened 0.2%, as hope grew for a deal to avoid the United States imposing tariffs on Mexican goods in return for Mexico doing more to halt illegal immigration. Stocks in Mexico ticked up 0.1%, as gains among industrials were almost negated by losses among financials, while yields on local, 10-year bonds fell 4 basis points to 7.96%. "In spite of the recent noise of tariffs in Mexico, I don't really consider Mexico to be a higher risk local bond market," Cathy Hepworth, co-head of the emerging markets debt team at PGIM Fixed Income, told Reuters. "From a valuation perspective, local bonds in Mexico look okay." Colombia's peso softened 0.5%, weighed on by lower oil futures, while Chile's peso dipped on soft copper prices. Argentina's peso weakened 0.5%, with data showing industrial output for April tumbled 8.8% year on year. Weaker-than-expected U.S. private jobs data increased expectations the U.S. Federal Reserve will trim dollar borrowing costs this year, broadly denting the greenback against the global currencies. Latin American stock indexes and currencies at 1900 GMT Stock indexes Daily % Latest change MSCI Emerging Markets 1,004.08 -0.13 MSCI LatAm 2,706.26 -0.72 Brazil Bovespa 96,365.21 -1.04 Mexico IPC 43,301.55 0.14 Chile IPSA 4,960.32 -0.9 Argentina MerVal 35,185.25 1.4 Colombia IGBC 12,056.90 -0.83 Currencies Daily % Latest change Brazil real 3.8808 -0.63 Mexico peso 19.5235 0.19 Chile peso 693.3 -0.06 Colombia peso 3,304.5 -0.43 Peru sol 3.34 0.24 Argentina peso (interbank) 44.9000 -0.40 ($1 = 3.8763 reais) (Reporting by Aaron Saldanha in Bengaluru)