* Contingency planning underway to help Spain-sources
* Brazil market bounces back from 8-month low
* Brazil Bovespa up 3.19 pct, Mexico IPC up 0.5 pct (Add comments, closing prices)
By Danielle Assalve and Asher Levine
SAO PAULO, June 6 (Reuters) - Latin American stocks rose on W ednesday as Brazil’s market bounced back from an eight-month low after signs that Europe could move to rescue Spain’s troubled banks lifted equities around the world.
The MSCI Latin American stock index rose 2.48 percent as Brazil’s market rose by the most in more than two weeks.
Still, analysts said the market could resume the sharp decline that started in March and has been fed by fears about Europe’s debt crisis and stalling growth in Brazil, Latin America’s top economy.
“The market is recovering a bit after yesterday’s losses, with some bargain-hunting, but it’s still very vulnerable,” said Sergio Machado, a partner at Vetorial Asset in Sao Paulo.
Shares gained as sources familiar with discussions said intensive contingency planning was already under way for European Union aid to Spain, currently reeling from a banking crisis and struggling with prohibitive borrowing costs.
“We had weeks and weeks of silence with the markets worsening, and now we are seeing a new mobilization from politicians in thinking of new strategies,” said Adriano Moreno, a strategist with advisory firm Futura Investimentos in Salvador, Brazil.
Brazil’s benchmark Bovespa stock index rose 3.19 percent to 54,156.04, climbing back above a key support level that was broken in the previous session and triggered stop losses.
Analysts were still cautious. Before Wednesday’s gains, the Bovespa had slumped more than 22 percent since mid-March.
“It’s still early to say that the worst is over. If the 53,000 level is supported, its possible we’ll see a rally in the next few days,” Moreno said.
If 53,000 is eroded again, stocks could fall more than 5 percent to around 50,000, analysts said.
Concerns about slowing growth in Brazil have also been hurting the local market. Data o n W ednesday showed automobile output in May scaled back to its slowest in three months.
Shares in OGX, the oil firm controlled by Brazil’s richest man, Eike Batista, jumped 9.47 percent, while preferred shares of Vale, the world’s largest iron-ore producer, gained 2.95 percent.
Shares in Banco Cruzeiro do Sul plunged 42.1 percent in the first trading session after a central bank decision to intervene in the troubled consumer lender.
Mexico’s IPC index rose 0.5 percent to 37,274.79 as telecommunications firm America Movil rose 0.49 .p e rcent and top U.S. cement supplier Cemex added 3.42 percent.
Broadcaster Televisa rose 0.41 percent. Mexican competition regulators are due o n W ednesday to give a final verdict on the company’s planned purchase of half of cell phone company Iusacell.
Chile’s IPSA index ended a three-day slump, rising 1.54 percent to 4,270.31. The index has remained mostly rangebound between 4,200 and 4,300 points over the past month.
Industrial conglomerate Copec added 3.62 percent, contributing most to the index’s gain, while retailer Falabella rose 1.21 percent. (Additional reporting By Michael O‘Boyle in Mexico City; Editing by Dan Grebler)