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EMERGING MARKETS-Brazilian stocks slammed by fears of govt interference, FX down

    * Petrobras, Bovespa set for worst day since March
    * Coronavirus aid extension in Brazil to be discussed this
week
    * Mexican peso down for sixth straight session 
    * Chile's peso sole gainer 

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    Feb 22 (Reuters) - Brazil's benchmark Bovespa index tanked
on Monday as oil major Petrobras plummeted 21% following the
ouster of its investor-backed chief executive, while Latin
American stocks and currencies fell as higher inflation
expectations hurt sentiment. 
    After weeks of sparring between CEO Roberto Castello Branco
and Brazilian President Jair Bolsonaro on fuel prices, former
Defense Minister and retired army general Joaquim Silva e Luna,
who has no oil and gas experience, was appointed to take over.

    Branco's ouster could force a broader shakeup at Petrobras,
which has steered toward more market-friendly and less
politically driven policies in recent years.
    Petrobras shares were on course to
post their sharpest one-day decline since March last year, as
was the Bovespa, which sank nearly 4%.  
    "The reversal of these types of practices by Bolsonaro early
in his administration was a key credit positive for Brazil's
quasi-sovereigns," said Citigroup strategists. 
    "A reversal of this policy is a clear credit negative."
    Banco do Brasil, caught up in a spat with
Bolsonaro over branch closings, slumped 11%, while power company
Eletrobras skidded nearly 3% amid signs of the
president's interference in the power sector.

    Brazil's real fell as much as 2.8%, hitting
lows not seen since November last year, while the cost to insure
exposure to Brazil's sovereign debt jumped 22 basis points from
Friday's close.
    "Local assets will underperform across the board in the very
short-term," Citigroup warned, adding that a break in the key
5.50 level of dollar-real pair could see further continuation of
weakness in the real.  
   Investors also have their eyes on a discussion regarding an
extension of Brazil's emergency aid bill this week, with eyes on
cost cuts elsewhere to keep spending within the limit.

    Worries about stretched fiscal spending have caused the real
to lag its emerging market peers widely in 2020. This year, the
currency is down about 6% so far.  
    Other currencies in Latin America also
dropped, pressured by rising U.S. Treasury yields and inflation
expectations.
    Higher U.S. yields pressure risk-driven assets by offering
relatively stronger and safer returns. 
    In its sixth straight day in the red, Mexico's peso
hit its lowest since early November as a deep freeze in Texas
continued to raise concerns about a hit to factory activity in
the country.
    A corresponding surge in oil prices failed to support the
peso, while Colombia's peso also dropped.
    Surging copper prices saw Chile's peso as the only
gainer for the day. 
        
    Key Latin American stock indexes and currencies:
    
                              Latest      Daily % change
 MSCI Emerging Markets         1402.48               -1.93
                                        
 MSCI LatAm                    2311.50                -3.8
                                        
 Brazil Bovespa              114019.83               -3.72
                                        
 Mexico IPC                   45035.62                 0.3
                                        
 Chile IPSA                    4569.36               -1.18
                                        
 Argentina MerVal             49446.07              -3.033
                                        
 Colombia COLCAP               1348.63               -0.29 Currencies             Latest      Daily % change
 Brazil real                    5.4412               -1.08
                                        
 Mexico peso                   20.6505               -1.09
                                        
 Chile peso                      706.1                0.27
                                        
 Colombia peso                    3591               -0.60
 Peru sol                       3.6518                0.00
                                        
 Argentina peso                89.4300               -0.30
 (interbank)                            
                                        
 
    
 (Reporting by Susan Mathew in Bengaluru; Editing by Steve
Orlofsky and Dan Grebler)
  
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