* EM stocks hit over 2 year low * Brazil's real drops on data showing deflation * IMF raises Latam growth forecast for 2022 * Chile interest rate decision due on Wednesday (New throughout, updates prices, market activity and comments) By Susan Mathew and Amruta Khandekar Oct 11 (Reuters) – An index of emerging market stocks slumped 2.4% on Tuesday, on course for its biggest one-day drop in four months as recession and inflation fears gripped investors, while deflation in Brazil pushed the real to its lowest in more than a week. Globally, equity markets were pressured by jitters around rising interest rates and their impact on corporate profits, with the International Monetary Fund's global growth forecast cut for 2023 exacerbating concerns around an economic downturn. Along with chipmakers rout in Asia, and worries about rising COVID-19 cases and curbs in China, MSCI's index of emerging market shares hit 2-1/2-year lows with most Latin American stocks joining the sell-off. For Latam, the IMF raised growth forecast for 2022 to 3.5% from 3.0% forecast in July, thanks to strong activity in the first half. But growth is seen slowing in late 2022 and 2023 as partner country growth weakens, financial conditions tighten, and commodity prices soften, it said. Brazil's real fell 1.5% as data showed consumer prices in the country were in deflationary territory for the third month in a row in September, thanks to tax cuts on fuels and electricity ahead of a presidential election runoff. William Jackson, chief emerging markets economist at Capital Economics, said the latest inflation plunge confirmed that the tightening cycle has ended. After an extended weekend, Argentina's peso slipped nearly 1%. Mexico's peso was down 0.7%, hitting a session low. Data showed Mexican same-store retail sales rose by 8.2% in September compared to the same month last year. The Chilean peso was up 1.1%, outperforming its regional peers, a day before its central bank is due to announce a policy decision. Analysts expect the country to hike interest rates by 50 basis points. "Inflation has taken a downward trend in Brazil. I wouldn't be so high conviction that we're at that point yet in Chile or Colombia or Mexico", said Sarah Glendon, senior EM fixed income analyst at Columbia Threadneedle. Elsewhere, Russia's rouble slumped to a more than three-month low past 64 to the dollar earlier in the session as the Ukraine war escalated. It was last trading at 63.75. The currency, which saw a spectacular rebound from all-time lows thanks to capital controls and other central bank measures, is up 14% for the year – the best performing EM currency. But Russia remains uninvestable to foreign investors amid Western sanctions, analysts said. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 863.89 -2.36 MSCI LatAm 2163.77 -1.53 Brazil Bovespa 114744.53 -1.03 Mexico IPC 45966.15 1.12 Chile IPSA 4989.38 -1.78 Argentina MerVal 137742.84 -4.772 Colombia COLCAP 1183.18 -1.31 Currencies Latest Daily % change Brazil real 5.2691 -1.51 Mexico peso 20.0822 -0.63 Chile peso 926.9 1.08 Colombia peso 4601.38 -0.03 Peru sol 3.9596 -0.19 Argentina peso 150.6900 -1.00 (interbank) Argentina peso 276 0.36 (parallel) (Reporting by Susan Mathew and Amruta Khandekar in Bengaluru; Editing by Marguerita Choy and David Gregorio)
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