Latin America markets hammered

By Fiona Ortiz

BUENOS AIRES (Reuters) - Latin American stock markets and currencies suffered steep losses on Monday as risk-averse investors rushed to U.S. dollars on news of the spreading global financial crisis, and as falling commodities prices aggravated a stampede into U.S. safe-haven bonds.

Weekend news of bank rescues in Europe showed the credit crisis was spreading fast and sparked growing fears of a global recession.

Brazil's Bovespa stock index trimmed losses to 4.43 percent by the close after trading was halted twice when the market nosedived by 15 percent. It was the first time since 1999 that Brazil halted trade in stocks twice in one day.

Mexico's peso ended down about 5.00 percent to 11.75 per dollar, its weakest level since the government ended currency controls in late 1994 and its biggest one-day drop since the currency crisis of January 1995.

"We are in a state of panic. Markets are out of control," said Bertrand Delgado, an economist at IDEAglobal who researches Latin America.

Brazilian assets are particularly vulnerable because about half its stock market is linked to agriculture and minerals at a time of plummeting global commodities prices.

Brazil's real currency weakened by 7.0 percent at the close, its biggest one-day loss since 1999, even though the central bank offered dollar swaps for the first time in more than two years.

One economist called it the end of an era for the strong real, which had been favoured by global demand for raw material and growing emerging markets.