EMERGING MARKETS-Brazil's real bounces past weak GDP as Latam FX recovers

* Brazilian economy shrinks in Q3 * Brazilian stocks stocks up 1.7% * Mexican peso jumps 1% By Ambar Warrick Dec 2 (Reuters) - Latin American currencies recovered from more than one-year lows on Thursday, although sentiment remained fragile after data showed Brazil sank into a recession in the third quarter, and uncertainty over the Omicron coronavirus variant remained high. Brazil's real rose 0.6%, taking some support from expectations of improving demand for iron ore exports to China. Data showed the Brazilian economy, Latin America's largest, contracted 0.1% in the three months to September, amid surging inflation and a severe drought. Brazil's economic rebound from the worst of the COVID-19 pandemic has sputtered as inflation surged into double digits, forcing the central bank to raise borrowing costs aggressively. Brazilian stocks rose 1.7%, recovering from a 13-month low. Analysts flagged some positives for the economy going into 2022, particularly for sectors yet to fully recover from the pandemic. "We expect some of the still COVID impacted services sectors (in particular services to households) to recover further in coming months in tandem with further progress on the COVID vaccination program and renewed fiscal stimulus," analysts at Goldman Sachs wrote in a note. But they expect surging inflation and political uncertainty to weigh on economic activity in the coming months. Among other Latin American currencies, Mexico's peso jumped 1.1%, as it recovered from a more than one-year low hit last week. Mexican President Andres Manuel Lopez Obrador's pick for the next central bank head, Victoria Rodriguez, underlined her commitment to central bank independence, days after her nomination roiled markets amid concerns over political interference. Sentiment over Mexico's economy also remained fragile, after the central bank raised its inflation forecast and lowered its growth expectations for the year. The heightened inflation expectations put pressure on the central bank to hike interest rates further, which could benefit the peso in the short term. Most Latin American currencies have seen steep losses against the dollar since last week, as worries about the Omicron variant saw a wide move out of risk-driven assets. Broader emerging market currencies also recovered from recent losses on Thursday, although investors were awaiting more data on the COVID front. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1235.25 0.69 MSCI LatAm 2036.61 -0.19 Brazil Bovespa 102449.93 1.66 Mexico IPC - - Chile IPSA 4359.44 0.62 Argentina MerVal 86558.70 1.637 Colombia COLCAP 1420.14 0.13 Currencies Latest Daily % change Brazil real 5.6374 0.59 Mexico peso 21.2662 1.11 Chile peso 838.5 0.00 Colombia peso 3950.4 0.34 Peru sol 4.061 0.22 Argentina peso 101.0500 -0.03 (interbank) (Reporting by Ambar Warrick Editing by Frances Kerry)