Latin American stocks slump to 6-month lows on commodity prices

NEW YORK, Aug 11 (Reuters) - Latin American stocks slumped to their lowest levels in six months overall on Monday, as commodity prices continued to fall and local currencies weakened, encouraging investors to take profits.

The Morgan Morgan Stanley Capital International Latin American stock index .MILA00000PUS fell 3.30 percent, and is now 25 percent off its record peak seen in late May, after a huge rally of more 500 percent in the past five years.

The region’s economy is heavily dependent on exports of soybeans, coffee, sugar, copper, and crude oil, but on international markets soybean prices have fallen 24 percent in the past two months, copper prices are down 14 percent, while crude oil has slumped 18 percent.

Copper prices for example slid to six-month lows on Monday, while prices of zinc, nickel and other industrial metals also declined on worries about weak demand from top consumers China and the United States.

Investors are now concerned that the U.S. economic slowdown is affecting demand in developed economies in Europe and Asia as well as in some emerging market economies.

Brazilian stocks fell as the ongoing slide in commodity prices sparked a sell-off in miner Vale and local steelmakers such as Gerdau.

Sao Paulo's main stock index .BVSP fell 3.29 percent to 54,720.25, taking this month's losses to more than 8.0 percent.

The gloom filtered through to the currency market where Brazil's real BRBY, weakened 0.44 percent to 1.62 per U.S. dollar.

Traders say investors have been taking money out of Brazil to cover losses elsewhere, while uncertainty over the global economy has begun to put investors off riskier assets.

At the stock exchange, Vale VALE5.SA, the second-heaviest weighted stock in the Bovespa, tumbled 4.39 percent to 34.61 reais.

Brazilian steelmakers fell on speculation that lower demand for metals may prevent companies from implementing aggressive price rises next year. Gerdau GGBR4.SA tumbled 5.06 percent to 28.91 reais, while CSN CSNA3.SA> fell 3.92 percent to 52.93 reais and Usiminas USIM5.SA lost 4.06 percent to 57.65 reais.

State-run energy company Petrobras PETR4.SA, the most heavily weighted stock in the Bovespa index, dropped 2.53 percent to 32.70 reais. The company is expected to report an 18 percent increase in second-quarter profits to 8 billion reais, according to the median estimate of six analysts in a Reuters survey. Petrobras will release its results later on Monday.

Mexican stocks ended lower with the IPC stock market index .MXX off 0.70 percent at 26,943.69 points, dragged down by losses at cell phone operator America Movil.

“It’s not that the U.S. is getting better, but that the economy of the rest of the world does not look as strong,” said Benito Berber, an economist at RBS Greenwich Capital Markets.

Miner Grupo Mexico GMEXICOB.MX, one of the world's biggest copper producers, fell 5.32 percent to 15.49 pesos as copper prices fell sharply.

Top retailer Wal-Mart de Mexico WALMEXV.MX fell 1.38 percent to 40.01 pesos.

Argentine stocks slumped to their lowest level in 22 months on Monday, taking a hit from falling oil prices and a decision by credit rating agency Standard & Poor’s to cut the country’s sovereign debt ratings, traders said.

The benchmark MerVal index .MERV ended down at 1,708.95 points, its weakest showing since October 2006.

Index heavyweight Tenaris TENA.BATS.NTENR.MI, the world's top producer of seamless steel tubes for the energy industry, saw its stock shed 8.2 percent.

The MerVal’s losses deepened after S&P cut its foreign currency long-term sovereign credit rating for Argentina by one notch to “B” from “B+”, citing increased economic challenges such as inflation.

“The S&P (decision) was the blow the market needed to deepen the price losses,” said Hernan Labrone, an analyst at the Fenix Financial Company brokerage.

Chile stocks also ended lower in low-volume trading on Monday, led by commodities-related issues while the peso fell to a six-week low against a rebounding U.S. dollar ahead of a widely expected interest rate hike.

The Chile all-market IGPA stock index .IGPA fell 0.99 percent to close at 13,987.97 points, while the blue-chip IPSA .IPSA retreated 1.28 percent to 2,926.38 points.

“What’s setting the pace today is the fall in commodities-related stocks,” said Rodrigo Martin, head of research with the Banchile brokerage. “We’re also seeing lower average trade volumes ... which could be related to expectations for higher interest rates on Thursday.”

The Chile central bank is expected on Thursday to raise its benchmark interest rate 50 basis points to 7.75 percent to curb inflation, which was reported last week at 9.5 percent over the last 12 months.

Blue-chip percentage losses were led by fertilizer exporter SQM SQM_pb.SN as its shares slumped 6.28 percent, while iron ore miner CAP CAP.SN slid 4.71 percent.

Other losing shares included paper and wood pulp company CMPC CAR.SN and leading electricity generator Endesa Chile END.SN, down 1.52 percent and 2.31 percent, respectively.

Industrial conglomerate Copec COP.SN was among the few rising shares with a gain of 0.69 percent.