EMERGING MARKETS-Stocks, currencies and bonds slump as China hits back on US tariffs

By Johann M Cherian and Lisa Pauline Mattackal

April 4 (Reuters) - Emerging market stock, currencies and dollar bonds broadly tumbled on Friday, with indexes tracking Latin American stocks and currencies on track for their worst day since 2020, as China's retaliation to sweeping U.S. tariffs deepened fears of economic instability.

China announced additional tariffs of 34% on U.S. goods, days after U.S. President Donald Trump launched his trade onslaught on the world, with imports from Beijing slapped with the highest duties.

MSCI's index tracking Latin American equities .MILA00000CPUS tanked 7.1%, with the index recording its biggest daily drop since the 2020 market selloff during the COVID-19 pandemic.

MSCI's gauge of regional currencies .MILA00000CUS weakened 3.6% as the dollar =USD jumped. The gauge fell from the previous session's 10-month high and was on track to match its March 2020 one-day slump.

A slump in prices of crude oil and metals hit emerging market commodity producers, as investors priced-in the increasing likelihood of a global economic slowdown.

"China is the main market for Latin American commodities... we have the two main markets in the war and that is going to hit global demand," said Alfredo Coutino, director for Latin America at Moody's Analytics.

Emerging market sovereign dollar bonds fell across the board as investors sought safe havens such as the Japanese yen and U.S. Treasuries. Bonds issued by Kenya, Angola and Nigeria were among the hardest hit.

Indexes tracking emerging markets also tumbled, with an index tracking stocks .MSCIEF down 1.7% and the one tracking currencies .MIEM00000CUS losing 0.3%. Both were set for their worst week since February.

The day's trade reversed strong outperformance in the prior session for Latin American markets after the region was spared from the most stringent U.S. levies.

The selloff follows outperformance in emerging markets compared U.S. stocks and the dollar this year.

Some investors, however, see potential for that performance to continue despite tariffs.

"We continue to be bullish on EM assets," said Arif Joshi, portfolio manager, emerging markets debt at Lazard Asset Management.

"We're hoping ... that we just simply know what the (trade) rules are going to be in the next 30 days, to the extent that we get clarity on that, I think markets can normalize."

Mexico's peso MXN= depreciated 2.7%, sinking past 20 per dollar and set for its biggest daily fall since June.

Stocks of commodity heavyweights in Latin America fell, with Brazil-based Petrobras PETR4.SA down 4.3% and Colombia's Ecopetrol ECO.CN falling 4%. Mining giant Vale VALE3.SA slid 4.1%.

Argentina's Merval .MERV tumbled 7.4%.

Brazil's real BRBY, Chile's peso CLP= and Colombia's peso COP= dropped over 3% each against the dollar, with the real eyeing its worst day since April 2022.

Ecuador's international dollar bonds XS2214237807=TE, XS2214238441=TE, XS2214239175=TE dropped between 1.3 and 2 cents on the dollar, while Argentina's dropped around 2 cents each.

HIGHLIGHTS

Latam assets may receive a trade-war boost, investors say

Brazil's trade surplus exceeds expectations in March

China retaliation on US farm goods hits soybeans, bolstering Brazil

Colombia Finance Minister says government seeks new international debt markets, sees higher GDP growth

Key Latin American stock indexes and currencies at 1945 GMT: