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Brazil's Bovespa hits 6-month low

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Mexican stocks retreat ahead of election

By Sruthi Shankar

May 29 (Reuters) - Latin American assets were swept up

in a wave of selling in global markets on Wednesday, spurred by

rising Treasury yields as investors pared back their bets on the

scale of interest rate cuts from the Federal Reserve this year.

A combination of stronger-than-expected U.S. economic data,

hawkish remarks from Fed officials and lukewarm demand in

Treasury auctions lifted the 10-year note yield to a

four-week high.

That piled pressure on high-yielding emerging market assets

that tend to benefit from lower U.S. rates.

The Brazilian real eased 0.8% even as data showed the

domestic economy created a net 240,033 formal jobs in April,

exceeding expectations and indicating stronger economic

momentum.

The Mexican peso, the Colombian peso and the

Chilean peso fell in the range of 0.6% and 1.1% against a

stronger dollar.

Meanwhile, the MSCI Latam stocks index slid

nearly 2%, on track for its biggest percentage drop in a month.

Mexico's benchmark IPC index slid 1.3% to a

five-month low. Caution prevailed ahead of Sunday's presidential

election, with the latest opinion polls showing Mexican ruling

party candidate Claudia Sheinbaum extending her large lead over

her main rival.

"A solid mandate at the election will reduce uncertainty and

in the best case, the start of a new administration offers the

possibility of a modest change in direction under the relatively

more technocratic Claudia Sheinbaum," noted Jon Harrison,

managing director, EM macro strategy, at TS Lombard.

"We caution, however, that a positive outcome for Mexican

markets will face the greater challenge of the U.S. election

later in the year."

Brazil's main Bovespa index fell 0.6% to a more than

six-month low, with miner Vale sliding 2.2% on the

back of losses in Dalian iron ore prices due to weakening

fundamentals of the key steelmaking ingredient.

Brazilian airline Gol slipped 3.9% after its

parent company started talks with rival Azul to

"explore opportunities" following media reports about a

potential merger.

Shares of Azul dipped 4.8%.

HIGHLIGHTS:

** Brazil's public sector gross debt rose to 76.0% of GDP in

April

** Mexico presidential race has clear favorite, but

pollsters say turnout is key

** Mexico's electricity demand hits record amid extreme heat

and water shortages

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1070.95 -1.57

MSCI LatAm 2355.98 -1.9

Brazil Bovespa 123086.63 -0.56

Mexico IPC 54449.24 -1.33

Chile IPSA 6699.32 -1.11

Argentina MerVal 1557768.64 -0.844

Colombia COLCAP 1398.30 -0.73

Currencies Latest Daily %

change

Brazil real 5.1942 -0.79

Mexico peso 16.9396 -0.94

Chile peso 906.3 -1.14

Colombia peso 3859.68 -0.64

Peru sol 3.756 -0.51

Argentina peso (interbank) 893.5000 0.06