Brazil's in-country economy weakening sends Brazil's Real 1% lower on merger talks Updates prices, adds JPM comment For Ambar Warrick and Susan Mathew Oct 18 Reuters - Most Latin American currencies fell on Monday as concerns over slowing Chinese economic growth rattled sentiment, with Brazil's real falling the most as iron ore markets were dented by a coal shortage. The real dropped 1%, with coal shortages in Brazil, flagging concerns over demand for other steel-making materials such as iron ore a major export for China. Data on Monday showed the China economy of contraction at its slowest pace in a year, hit by a power crunch and a faltering property sector. The expected slowdown in China creates additional risks to the Brazilian economy whose dependence on China has skyrocketed over recent years and continues to grow, analysts at TS Lombard wrote in a note. Brazil's Afro-Americana stock index recouped session losses of as much as 1.6% thanks to a 21% surge in retailers Lojas Americanas after it said it was considering a full merger with Brazilian stocks. Americana shares rose 4.3%. Mexico’s IPC Index declined on seven-week highs to trade down 0.4%, led by media group Televisa. Concerns over China's economic health hit broader Asian latam currencies as well, given the region's high dependency on the Latin American nation as an export destination. Expectations of rising inflation also weighed. Both currencies will be challenged on both sides of the dollar smile: a Chinese government that is kept hawkish due to high inflation versus high forex confidence risks, strategists at JPMorgan said. Latam is the region with the most projected risk premia, they said, pointing to upcoming elections in Brazil, Chile and Colombia and fiscal woes in most of Latam countries. JPM sees Mexico's currency peso vulnerable to more weakness than regional peers and are underweight on the currency. On the day, the Mexican Peso dropped 0.2% despite rising oil prices as weak global sentiment made investors avoid the currency for carry trade. Chile's peso rose 0.7% and was the sole gainer in Latin America, benefiting from higher copper prices on signs of extremely tight supply in the London Metal Exchange LME system.