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EMERGING MARKETS-Brazil's real leads gains as Latam bucks EM gloom

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* BRL up on economic prospects * Bolsonaro faces protests as COVID deaths cross 500,000 * Latam FX, stocks outpace EM peers * BlackRock pro-risk; Morgan Stanley turns bearish on EMFX (Adds details, updates prices) By Susan Mathew and Ambar Warrick June 21 (Reuters) - Brazil's real surged on Monday, trading just below one-year highs on a robust economic outlook, while Mexico's peso broke a six-session losing streak as the dollar lost momentum after a strong rally last week. The real rose 1% after a survey of economists forecast Brazilian growth, inflation and interest rates in 2021 to new highs following the central bank's indication that it could quicken the pace of tightening. Growth is now expected be to 5%, inflation 5.9%, and the benchmark Selic interest rate at 6.5%. Investors seemed to look past anti-government protests over the weekend as COVID-19 deaths in Brazil topped 500,000. This comes with Bolsonaro's popularity at new lows ahead of elections next year. A poll last month showed a left-wing rival, former President Luiz Inacio Lula da Silva, would win in a runoff vote if the 2022 elections were held today. "We believe a higher discontentment, especially if reflected in the polls, tends to push the government to an easier fiscal posture," Citi strategists said in a note. LATAM FX BUCK EM GLOOM Emerging market currencies had taken a hit last week as the dollar rallied after the U.S. Federal Reserve struck a surprisingly hawkish tone. Morgan Stanley in a Monday note said it had turned bearish on emerging market currencies, citing higher real rate in the United States, expensive valuations and risks for growth differentials to widen between developed and developing markets. Most emerging market currencies in Asia, Europe, the Middle East and Africa had fallen on Monday, but Latin America got a lift as the dollar consolidated gains. The MSCI's index of Latam currencies rose 0.9%, outpacing the emerging market index, which fell 0.2%. Mexico's peso looked to end its longest losing streak since February, up 0.9%, while Colombia's peso rebounded from six-week lows as oil prices stabilized from recent losses. Meanwhile, BlackRock maintained a pro-risk stance, citing a "powerful restart" after the pandemic, while adding that they do not see the Fed's new outlook translating into significantly higher interest rates any time soon. "Any temporary spikes in rates could challenge emerging market assets in particular, but we advocate staying invested and looking through any turbulence," BlackRock said in a note. Among stocks, Brazil's Bovespa index shrugged off early losses and rose 0.6%, with major industrials rising on better economic prospects. Latam Stocks also outpaced their emerging market peers. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1351.21 -0.74 MSCI LatAm 2627.55 0.83 Brazil Bovespa 129212.44 0.63 Mexico IPC 50349.79 0.06 Chile IPSA 4294.39 -0.83 Argentina MerVal 65136.00 -1.963 Colombia COLCAP 1249.71 -0.6 Currencies Latest Daily % change Brazil real 5.0185 1.04 Mexico peso 20.4891 0.82 Chile peso 747 0.14 Colombia peso 3757.05 0.24 Peru sol 3.9517 -0.05 Argentina peso 95.3700 0.00 (interbank) (Reporting by Susan Mathew and Ambar Warrick in Bengaluru; editing by Jonathan Oatis and Angus MacSwan)

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