* China dashes hopes for fiscal stimulus
* Greek leftists gain in recent poll
* Brazil Bovespa falls 1.46 pct, Mexico IPC down 0.48 pct
By Asher Levine
SAO PAULO, May 30 (Reuters) - Latin American stocks fell on Wednesday on dashed hopes of fiscal stimulus from China and fears of contagion from Spain’s ailing banks as the euro zone debt crisis worsened.
The MSCI Latin American stock index dropped for the second straight session, losing 1.73 percent to 3,375.21. A technical indicator known as the relative strength index edged closer to “oversold” territory, however, suggesting stocks could find support near that level.
Investors moved out of riskier emerging market assets on concerns Spain would need a bailout to support its banks and Greek could be headin for a messy exit from the euro zone.
Italy’s 10-year borrowing costs topped 6 percent at auction, the highest level since January, due to the troubles of fellow problem debtor Spain.
A poll of Greek voters on Wednesday showed the country’s anti-bailout party retaking the lead ahead of elections on June 17.
“With the problems in Europe being far from over, it is adding to risk aversion and affecting the market here, starting from currencies, and including other high-liquidity assets and commodities,” said Marcello Paixao, a partner at Sao Paulo-based Principia Capital Management.
China, a key purchaser of Latin American commodities and Brazil’s biggest trading partner, added pressure to local markets after an article published by the official Xinhua news agency denied the Asian giant is planning to enact large-scale fiscal stimulus measures to boost growth.
The Reuters/Jefferies CRB index of the 19 most-traded agricultural, energy and metals commodities fell 1.68 percent, its second-worst daily performance in nearly two months.
“When you have a big country with a lot of cash and good economic performance, there is the expectation that they are going to help support global markets,” said Paixao. “When they say they won’t take action, its damaging.”
Brazil’s benchmark Bovespa stock index posted its biggest drop in over a week, losing 1.46 percent to 53,835.53 and tracking towards its lowest close in over seven months.
Shares of widely-traded commodities producers weighed most heavily on the index, with OGX, the oil firm controlled by Brazil’s richest man Eike Batista, slipping 4.3 percent and iron-ore giant Vale falling 1.61 percent.
“The key number for the Bovespa now is 53,850, which had been tested three times last week,” said Daniel Marques, a technical analyst with Agora Corretora in Rio de Janeiro. “Each time it fell below only to return before the close. If it fails to do that today, that could signal a problem for coming sessions.”
Banco Santander Brasil, Brazil’s largest foreign lender, lost 1.12 percent after Chief Executive Officer Marcial Portela Álvarez told a local newspaper the company is not for sale, ending weeks of speculation on the matter.
Mexico’s IPC index notched its worst loss in eight sessions, losing 0.48 percent to 37,944.42. A technical momentum indicator known as the MACD posted a so-called “bullish cross,” suggesting stocks may rebound in coming sessions.
Broadcaster Televisa weighed most heavily on the index, losing 1.92 percent, while cement manufacturer Cemex dropped 2.7 percent.
“Everyone is nervous,” said Gerardo Roman, a trader at brokerage Actinver in Mexico City. “If there is not a way to contain (the euro zone crisis) in a coordinated and clear way then things could get worse.”
Chile’s IPSA index snapped a four-day rally, dropping 0.54 percent to 4,246.30.
Electric utility Endesa Chile fell 1.44 percent, driving losses in the index, while retailer Cencosud fell 1.33 percent. (Additional reporting by Rachel Uranga in Mexico City; Editing by Andrew Hay)