EMERGING MARKETS-Bovespa gains on Petrobras; Walmex dents Mexico

* Petrobras shares jump on possible fuel price rise
* Walmex posts weaker-than-expected sales in July
* Brazil Bovespa up 1.89 pct; Mexico IPC down 0.34 pct

By Asher Levine and Rachel Uranga
SAO PAULO/MEXICO CITY, Aug 8 (Reuters) - Brazilian stocks
rose on Wednesday, led by a more than 4 percent spike in shares
of oil producer Petrobras on optimism over a possible
increase in government-mandated fuel prices.
The MSCI Latin American stock index rose for
the third session in four, adding 0.85 percent to 3,670.98
points and breaking through its 100-day simple moving average, a
level above which the index has failed to close for nearly four
months.
Brazil's benchmark Bovespa stock index de-coupled
from falling markets abroad with the rise in Petrobras. In
Mexico, retailer Wal-Mart de Mexico helped drag
down the IPC index, which fell for a second day.
Petrobras shares rose after Brazilian Energy Minister Edison
Lobao said on Wednesday that an increase in fuel prices is
necessary, which could help boost income at the company, which
reported its first quarterly loss in 13 years on Friday.
Petrobras sells fuel at a loss due to the long refusal of the
federal government, the company's controlling shareholder, to
let it raise fuel prices in line with increases in market prices
for crude.
"Today the big driver is Petrobras," said Joao Simoes, a
portfolio manager with Duna Investimentos in Sao Paulo. The
government "saw that Petrobras is in a delicate situation. They
milked the cow so hard they almost killed it."
Other widely traded stocks rose on the Bovespa index. Iron
ore miner Vale gained 1.27 percent, and Brazil's
biggest private lender, Itau Unibanco, rose 1.68
percent.
Fears over a worsening euro zone debt crisis in recent
months led many foreign investors to sell Latin American stocks
in favor of safe-haven investments such as the U.S. dollar. That
trend started to reverse in recent days as investors have become
more optimistic that the European Central Bank will take action
to resolve the region's fiscal woes.
"Everyone is prepared for the worst, wrapped up in defensive
positions," Simoes added. "If that doesn't happen people are
going to have to unwind those positions and return to putting
more risk in their portfolios. That's starting to happen now."
Shares of BM&F Bovespa, the world's No. 3
financial exchange, gained 1.19 percent. The company reported
second-quarter profit rose 2 percent from a year earlier, below
analysts' forecasts as financial expenses and taxes jumped. BM&F
executive on Wednesday said a recent wave of equity delistings
and initial public offering cancellations in Brazil are unlikely
to permanently affect the company.

In Mexico, the IPC stock index slipped 0.34 percent to
40,930.54.
Shares of Mexico's biggest retailer, Walmart de Mexico,
dropped 2.46 percent after the company reported
weaker-than-expected sales and a 2.1 percent decline in
transactions in July compared with the same period last year.

"We are seeing store traffic fall for a third straight
month," said Paola Sotelo, an analyst at Monex in Mexico City.
"There are less consumers in their stores and it could be a
consequence of more aggressive competition."
Walmex accounts for more than 10 percent of the IPC index.
Chile's IPSA index rose for the first session in
three, adding 0.47 percent to 4,172.28.
Industrial conglomerate Copec rose 1.41 percent,
contributing the most to the index's rise, while regional energy
group Enersis climbed 1.01 percent.
Latin America's key stock indexes at 1616 GMT:
Stock indexes daily % YTD %
Latest change change
MSCI LatAm 3,670.98 0.85 1.05

Brazil Bovespa 58,818.64 1.89 3.64

Mexico IPC 40,930.54 -0.34 10.39

Chile IPSA 4,172.28 0.47 -0.13

Chile IGPA 20,186.45 0.29 0.28

Argentina MerVal 2,472.48 0.84 0.40

Colombia IGBC 13,306.47 -0.91 5.06

Peru IGRA 19,789.32 0.18 1.62

Venezuela IBC 248,568.17 0.21 112.39