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EMERGING MARKETS-Latam stocks track broader rally; Brazil's real dips

Susan Mathew and Ambar Warrick

* Real drops as economic outlook deteriorates * Colombian central bank minutes expected * Brazilian, Mexican manufacturing PMI come off record lows in May (Adds details, updates prices) By Susan Mathew and Ambar Warrick June 1 (Reuters) - Latin American stocks rose on Monday, tracking their global peers amid some relief over Sino-U.S. tensions, while Brazil's real fell on further concerns over the country's economic outlook. The MSCI's index of regional shares rose 2.6% as Washington stopped short of imposing new tariffs or sanctions on Beijing and left their so-called Phase 1 trade deal intact while responding to China's new security law on Hong Kong. But sources said China has asked state-owned firms to halt purchases of soybeans and pork from the United States, after U.S. President Donald Trump moved to revoke Hong Kong's special status under U.S. law. Still, the lack of any immediate escalation in tensions saw Brazilian stocks add 1.7%, while those in Mexico and Chile rose 2.3% and 1.5%, respectively. Surging iron ore prices buoyed Brazilian mining giant Vale , while planemaker Embraer SA rose after it said China and India could be new partners after its deal with Boeing Co fell apart. Brazil's real fell 0.9% after a central bank survey showed the 2020 outlook for the economy deteriorated for a 16th week in a row, to a new consensus of a 6.25% contraction. Still, data showed manufacturing activity in Latin America's largest economy improved slightly in May from record lows, pointing to some headway in an eventual, but arduous recovery from disruptions caused by the coronavirus outbreak. Mexico's peso firmed 0.4% as the country's manufacturing sector showed a similar trend as Brazil in May. Chile's peso traded higher tracking gains in the price of copper, the country's top export. Colombia's peso traded slightly higher to the dollar, while stocks added more than 1% ahead of the central bank's minutes from its May 29 policy meeting, when it had cut interest rates to a record low 2.75%. "Given the severe negative economic impact, downside risks to inflation, and favorable exchange rate dynamics, we continue to believe the MPC (Colombia's Monetary Policy Committee) will cut the policy rate further to a 2.25% terminal level," Goldman Sachs analysts wrote in a note. "However, while we see another 50bp cut in June as the most likely next step, the latest split decision has increased the risk of a smaller 25bp cut at the next meeting." A rash of fiscal and monetary policy support has helped emerging markets rally from March lows on hopes of an economic recovery. Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 951.67 2.29 MSCI LatAm 1820.04 2.56 Brazil Bovespa 88900.01 1.71 Mexico IPC 36972.46 2.35 Chile IPSA 3700.67 1.45 Argentina MerVal 39330.22 3.98 Colombia COLCAP 1109.50 1.25 Currencies Latest Daily % change Brazil real 5.3880 -0.91 Mexico peso 22.0735 0.43 Chile peso 793.5 1.64 Colombia peso 3718.57 0.20 Peru sol 3.4197 0.21 Argentina peso 68.6200 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; editing by Grant McCool and Tom Brown)