(Updated at 1515 GMT)

*

Peso steady after slump on Monday

*

Brazil c.bank minutes show policymakers prepared to hike

rates

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BRL up over 1%

By Lisa Pauline Mattackal

Aug 6 (Reuters) - Stocks across emerging market

economies clawed back ground and Latin American currencies rose

on Tuesday, as risk assets recovered from heavy selling in the

previous session.

An index of Latin American stocks picked up

nearly 2%, while MSCI's index of regional currencies

jumped 1.7%.

MSCI's index of emerging market stocks rose 1.3%

after its worst day in more than two years on Monday, when a

combination of concerns about a U.S. economic recession,

disappointing tech earnings and geopolitical worries saw

investors flee risk assets.

However, some calm returned to markets on Tuesday, with most

emerging market assets gaining as traders continued to price in

a hefty 50 basis-point interest rate cut from the Federal

Reserve by September, though they trimmed those bets to 72% from

Monday's 86% as per CME's FedWatch.

Lower rates in the U.S., the world's largest economy,

typically benefit emerging market stocks and currencies.

Meanwhile, Mexico's peso was steady against the

dollar after slumping to its lowest in nearly two years, as bids

for the safe-haven Japanese yen saw crowded carry trades

unwind, hitting higher-yielding emerging market currencies.

"Rapid yen repricing started to destabilize flows, but we

are only back to exchange rates of late 2023 and the fundamental

reasons for carry trade - stronger U.S. fundamentals and higher

neutral rates - are still intact," said Victor Shvets, head of

global desk strategy at Macquarie Capital.

EASING CYCLE

Interest rate decisions from Mexico and Peru are due later

in the week.

A near 1% rebound in oil prices helped lift

Colombia's peso and the Brazilian real 0.4% and 1%

respectively. Chile's peso also gained more than 1% against the

dollar.

Minutes from the Brazilian central bank's July meeting

showed policymakers were prepared to raise interest rates if

necessary to bring down inflation.

The central bank had kept rates unchanged in July, keeping

its easing cycle on hold as inflation expectations worsened.

Regional bourses in Latin America jumped, with Argentina's

Merval, Brazil's Bovespa and Mexico's main index

rising between 0.1% and 1.9%.

Geopolitical risks also remained firmly on the radar.

Lebanon's armed group Hezbollah launched a series of drone and

rocket attacks into northern Israel, while warning that more

retaliation was to come.

The International Monetary Fund said it remained "fully

committed to Bangladesh and its people" after protests ousted

prime minister Sheikh Hasina, while the World Bank said it was

still assessing the impact on its lending commitments.

Markets in Peru were closed for a local holiday.

HIGHLIGHTS

** Global market rout has more to do with end of cheap

funding than US economy

** GRAPHIC-Unwind of 2024's winning trades batters global

markets as growth fears spike

Key Latin American stock indexes and currencies:

Equities Latest Daily %

change

MSCI Emerging Markets 1029.77 1.31

MSCI LatAm 2120.11 1.98

Brazil Bovespa 125444.48 0.14

Mexico IPC 52027.93 0.49

Chile IPSA 6172 1.2

Argentina Merval 1448216.5 1.95

6

Colombia COLCAP 1301.48 0.53

Currencies Latest Daily %

change

Brazil real 5.665 1.03

Mexico peso 19.329 0.02

Chile peso 945.1 0.94

Colombia peso 4137.04 0.37

Peru sol 3.7285 -0.58

Argentina peso (interbank) 935.5 -0.053447

354

Argentina peso (parallel) 1345 3.3457249

07