* Emerging market stocks hit 7-1/2 month high
* Brazil's real climbs more than 2 percent vs USD
By Daniel Bases
NEW YORK, May 19 (Reuters) - Emerging markets held gains made on the back of a short-lived rally on Wall Street, in a sign that investors remain hopeful that a rise in commodity prices will support stronger economic growth ahead.
MSCI's broad emerging markets stock index .MSCIEF rose 2.58 percent to 747.34 while the MSCI Latin American stock index .MILA00000PUS gained 2 percent to 2,899.26. Both now sitting at 7-1/2 month highs.
A falling U.S. dollar aided the rise in commodity prices, which underpin emerging market economies. Crude oil rose more than 1 percent to $59.65 a barrel CLc1 while gold gained 0.8 percent or $7.35 an ounce to finish over $924.50 XAU=.
Analysts cite China's economic stimulus as one possible reason for increased commodity prices which in turn help support emerging markets. But questions remain if this jolt is akin to a "sugar shock" whereby increased economic activity will stop as soon as the spending is done.
"There is still scepticism as to how real the recovery in China is," said Benito Berber, Latin American strategist at RBS in Greenwich, Connecticut.
"There has not been any sort of indisputable sign of (global) economic recovery yet, but the flow of bad news continues to decrease... I don't think there are market positions that have a lot of conviction behind them," said Berber.
Wall Street's rally was stopped short as financial shares sank after the U.S. Senate passed a bill to curb sudden credit card interest rate increases and hidden fees.
But the impact of the bill, which is expected to hurt profits of major credit card issuers, occurred too late in the day to cut short the emerging market rally.
Emerging market credit spreads narrowed 7 basis points to 478 basis points, according to the benchmark JP Morgan EMBI+ index 11EMJ, as investment appetite for riskier assets remain supported by the view that markets have seen the bottom of the recession.
But that view could be challenged.
"We are not convinced this latest two-day global asset rally is sustainable, with our technical strategists warning of an impending correction window," said RBC Capital Markets.
In the currency markets, Brazil's real surged to a seven-month high, closing 2 percent stronger at 2.035 reais to the U.S. dollar. Increasingly strong investment flows are seen supporting the real as Brazil is viewed as one of the economies that will rebound stronger and faster than other emerging economies.
Itau Unibanco vice president and chief of investor relations Alfredo Setubal told Reuters Television that the rally in the real is likely to continue as dollar inflows to the country increase.
"We expect this flow of dollars to continue to go to Brazil, we expect the economy to grow. So, the probable scenario in terms of currency is that we are going to see the real gaining," he said. [ID:nN19449678]
The Mexican peso surged to a six-month high, firming 1.35 percent to 12.9435 per U.S. dollar at the central bank's final 1:30 p.m. local time (1830 GMT) reference, its strongest local close since mid-November. (Additional reporting by Vivianne Rodrigues and Walter Brandimarte in New York; Michael O'Boyle in Mexico City and Guillermo Parra-Bernal in Sao Paulo; Editing by Diane Craft)