EMERGING MARKETS-Latam joins broader EM sell-off on growth worries; Argentine assets recover

(Updates prices) By Susan Mathew July 5 (Reuters) - Emerging market currencies were battered on Tuesday as the dollar reigned supreme amid heightening recession fears, while Argentine assets recovered after the newly appointed economy minister promised fiscal responsibility and stability. Argentina's Silvina Batakis quickly moved to calm markets about worries that the abrupt exit of her predecessor, Martin Guzman, would spark a shift towards populist policies and state spending. The black market exchange rate, seen as a reflection of real investor sentiment in the currency, rose more than 1% to 257 per dollar, after sliding to around 280 to record lows on Monday. "Batakis is more of an unknown to the investor community; however, her alignment with Kirchner makes us nervous that she could boost fiscal spending and disregard the IMF program," said Brendan McKenna, international economist with Wells Fargo Securities. He was referring to hard left Vice President Cristina Fernandez de Kirchner, a divisive but powerful figure who was a two-term president from 2007-2015 and commands a major support base. "Any deviations from achieving fiscal balance and other reform items could see pressure build on the peso to the point where a 10% - 15% devaluation is needed to avoid another full-blown crisis." The official peso gave up another 0.2% on Tuesday. Latam's leftward shift could see a drop in M&A and equity deals intensify through the end of the year, the region's bankers said, as Brazil goes through its presidential elections in October, where leftist former President Luiz Inacio Lula da Silva is ahead in opinion polls. Meanwhile, broader risk sentiment took a hit after European gas prices surged on supply concerns amid strikes at a Norwegian oil and gas infrastructure, exacerbating fears over spiraling inflation and slowing economic growth. MSCI's index of emerging market currencies hit 20-month lows, with falling copper prices as 9% plunge in Brent crude sent currencies of Chile and Colombia to new lows. Chile's peso slumped 2.3% to 950.52-a-dollar, while Colombia's currency touched 4.275.50. With safe-haven demand sending the dollar index up more than 1%, Mexico's peso slid 1.5%, while Brazil's real slumped 1.4% with to hit five-month lows. A less than expected rise in Brazil's May industrial output added to the gloom. "Slowdown fears are now arguably the main driver of currencies globally, perhaps even more so than central bank interest rate expectations," said Matthew Ryan, head of market strategy at financial services firm Ebury. Stocks in Latam also fell, with Mexico's IPC index sliding 1.5%, while Colombia's COLCAP index slumped 2.4% to over seven months lows. Latin American stock indexes and currencies at 1905 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 989.82 -0.3 MSCI LatAm 1980.23 -2.75 Brazil Bovespa 97744.11 -0.88 Mexico IPC 47329.30 -1.47 Chile IPSA 4989.51 0.01 Argentina MerVal 91594.24 2.766 Colombia COLCAP 1325.94 -2.36 Currencies Latest Daily % change Brazil real 5.3975 -1.37 Mexico peso 20.5738 -1.53 Chile peso 950.6 -2.52 Colombia peso 4270.6 -1.76 Peru sol 3.8502 -0.91 Argentina peso 126.1800 -0.17 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Alistair Bell and Grant McCool)