* Brazil manufacturing activity jumps at record pace in August * LatAm equities track best day since June * Chilean peso climbs ahead of central bank meeting * Mexican peso firms as pace of slide in business conditions eases * EM bonds, stocks inflows continue but decelerate in August-IIF By Sagarika Jaisinghani Sept 1 (Reuters) - Brazil's real jumped 2% and Latin American equities tracked their best day in three months on Tuesday as iron ore prices climbed and data signaled a solid recovery from the COVID-19 pandemic. The real was up 2.1%, recovering from a slide in the previous session due to data showing a deterioration in the country's finances to shore up the economy during the pandemic. "Concerns about the future development of Brazilian state finances remain the dominating factor," said Commerzbank analyst Esther Reichelt. "Over the past weeks, the real had come under pressure when suspicions arose that (the spending) cap was going to be avoided or watered down (and) ... the FX market will continue to react nervously to any news in this context." The real has been hammered this year - down about 25% at record lows - as the pandemic wiped out growth, with figures showing a record contraction in Latin America's biggest economy in the second quarter. But latest data confirmed Brazilian manufacturing expanded at a record pace in August, with employment hitting a 10-year high. The country's stock index jumped 2.4%, also propelled by a 2.5% gain for miner Vale SA on the back of higher iron ore prices. An index of Latin American currencies firmed 1.8% to its highest in nearly one month, with the global outlook picking up following robust manufacturing surveys from some of the world's biggest economies. Among regional currencies, gains were led by the Chilean peso as data showed a smaller-than-feared decline in economic activity. All eyes are now on a central bank meeting later in the day, where it is expected to keep interest rates unchanged. "We think the bank will reiterate that it will keep a strong monetary impulse for a prolonged period and that the rate will likely remain at its technical minimum of 0.5% over the policy horizon," said Alonso Cervera, managing director of emerging markets economics research at Credit Suisse. The Colombian peso jumped 1.6% a day after the central bank trimmed interest rates, as expected. The Mexican peso firmed 0.5% against a weaker dollar. Local surveys showed factories were still hurting last month from the pandemic, with production falling and firms cutting workers, but the pace of the slide in business conditions eased for a fourth straight month. A basket of emerging market equities jumped 3.4% and was on course for its strongest session since June. Emerging market stocks and bonds saw foreign net inflows in August, but the pace of flows has sharply slowed since June, data from the Institute of International Finance showed on Tuesday. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1116.17 1.33 MSCI LatAm 2002.03 3.44 Brazil Bovespa 101736.55 2.38 Mexico IPC 37237.07 1.08 Chile SPIPSA 3757.46 -0.26 Argentina MerVal 46853.09 0.038 Colombia Colcap 1232.74 1.37 Currencies Latest Daily % change Brazil real 5.3663 2.12 Mexico peso 21.7770 0.47 Chile peso 769.5 0.91 Colombia peso 3680.18 1.62 Peru sol 3.5208 0.59 Argentina peso (interbank) 74.2400 -0.08 (Reporting by Sagarika Jaisinghani in Bengaluru Editing by Alistair Bell)
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