(Recasts with currency losses, updates prices) By Bruno Federowski SAO PAULO, Nov 7 (Reuters) - Brazilian stocks sank to a two-month low on Tuesday on concerns a corruption probe would sap the government's ability to further cut spending, while Latin American currencies weakened. Mexico's peso and Brazil's real lost ground as the dollar broadly gained on expectations the United States would raise interest rates faster than Europe. Higher U.S. rates could attract yield-hungry investors away from emerging markets. Brazil's benchmark Bovespa stock index sank nearly 2.6 percent in its biggest one-day drop since May. Investors are concerned that Brazilian President Michel Temer will be unable to manage more government spending cuts after corruption charges drained his political clout. Finance Minister Henrique Meirelles said on Tuesday that Temer's pension overhaul plan, which investors regard as key to curbing growth of public debt, could still be approved before presidential elections next year. But traders remained skeptical that the reforms would be meaningful and analysts have said that lawmakers allied to the unpopular center-right president might water down the plan to guarantee its passage. "The market is working with the assumption of a very limited reform," analysts at Citibank wrote in a client note. Key Latin American stock indexes and currencies at 2315 GMT: Stock indexes Latest Daily YTD pct pct change change MSCI Emerging Markets 1,134.55 0.31 31.58 MSCI LatAm 2,766.01 -1.49 18.17 Brazil Bovespa 72,414.88 -2.55 20.24 Mexico IPC 49,004.52 0.08 7.37 Chile IPSA 5,490.82 -0.66 32.26 Chile IGPA 27,600.91 -0.62 33.12 Argentina MerVal 28,120.22 0.51 66.22 Colombia IGBC 10,740.90 1.58 6.05 Venezuela IBC 711.93 0.36 -97.75 Currencies Latest Daily YTD pct pct change change Brazil real 3.2763 -0.56 -0.83 Mexico peso 19.1450 -0.70 8.31 Chile peso 634.35 -0.36 5.73 Colombia peso 3,033.98 0.07 -1.07 Peru sol 3.242 -0.12 5.31 Argentina peso (interbank) 17.6550 -0.03 -10.08 Argentina peso (parallel) 17.95 0.33 -6.30 (Reporting by Bruno Federowski; Editing by Andrea Ricci and Richard Chang)
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