* Bovespa breaks 53,000 level, more losses expected
* Mexico's IPC set to test 200-day SMA
* Bovespa falls 1.75 pct, Mexico edges up 0.08 pct (New throughout)
By Michael O'Boyle and Danielle Assalve
MEXICO CITY/SAO PAULO, June 5 (Reuters) - Brazilian stocks fell to an eight-month low on Tuesday, breaking key support that could augur for a deeper slump on worries about a blow up in Europe's debt crisis and stalling growth in Latin America's top economy.
Brazil's benchmark Bovespa stock index sank 1.75 percent to 52,481.44, its lowest since October after blowing through support at 53,000 points.
The index could fall another 6 percent before it triggers significant bargain hunting, technical analysts said.
"It is a massacre in Brazil," said Carlos Alonso, a trader at Interacciones in Mexico City. "The Bovespa is getting near levels that could trigger even more stop losses from foreign investors."
The Bovespa has slumped more than 22 percent since March, with May marking the biggest percentage loss since the depths of the 2008 credit crisis. Foreign investors last month pulled out 2.34 billion reais ($1.15 billion), the biggest net outflow of the year.
"Foreign investors just keep selling," said Daniel Marques, an analyst at brokerage Agora.
Marques said the break of the 53,000 level could suggest the Bovespa will fall to 49,400 points. Still, he noted Tuesday's total volume of around 5 billion reais was lower than average.
"Today's sell off would have been much more catastrophic if the loss of support was backed by a higher trading volume," he said.
Worries about Europe's worsening debt crisis have hammered riskier assets around the world, including Latin American equities, and traders said only strong policy action in Europe could stem the rout.
"Europe is the center of attention, if there are measures that help growth there, it should be felt throughout all markets," Interacciones Alonso said.
G7 finance ministers held an emergency teleconference on Tuesday to discuss a solution to the euro zone debt crisis, but the meeting closed without an agreement on joint action.
In Brazil, data on Tuesday showed business activity in the services sector fell in May for the first time since July 2009, in a sign manufacturing weakness has started to drag on the main engine of the country's recent economic growth.
Shares in OGX, the oil firm controlled by Brazil's richest man Eike Batista, shed 6.22 percent. State oil firm Petrobras lost 1.62 percent.
Cyrela Brazil Realty, Brazil's No. 2 homebuilder, shed 5.32 percent. Top homebuilder PDG Realty lost 3 percent.
Mexico's IPC index edged up 0.08 percent to 37,089.36, supported by data showing the vast U.S. services sector improved in May. Mexico sends nearly 80 percent of its exports to its northern neighbor.
The IPC is struggling to hold above support at its one-year exponential moving average just above 37,000. Traders said a break below the 200-day simple moving average at 36,800 could bode for steeper losses.
Telecommunications firm America Movil, controlled by billionaire Carlos Slim, lost 0.42 percent after news it had purchased a 4.1 percent stake in Telekom Austria, in a new move into the European market.
Lender Grupo Financiero Banorte, the biggest Mexican-owned bank, rose 1.9 percent.
Chile's IPSA index ended flat as a 1.15 percent gain in industrial conglomerate Copec was offset by a 1.38 percent loss in retailer Cencosud.
$1 = 2.0264 Brazilian reais Editing by Andrew Hay