Latin America stocks rebound after Monday meltdown

Gains were greater than in any other region of the world, reversing much of the beating that markets took Monday. Analysts warned regional stocks could face huge swings in coming days.

Sao Paulo's Ibovespa index rose 7.6 percent to close at 49,541 after falling 9.4 percent a day earlier, its steepest drop since 1999. Brazil's currency, the real, regained some ground against the U.S. dollar after hitting a one-year low on Monday.

Mexico's main IPC index closed 3.9 percent higher at 24,889, while Chile's Ipsa index rose 4.6 percent to 2,753 and Buenos Aires's Merval index climbed 3.4 percent to 1,598.

Investors battered stocks throughout the region on Monday, dumping emerging market positions they considered particularly risky as U.S.-led financial turmoil spreads.

"There was a panicked overreaction yesterday when the bailout wasn't approved," said Alejandro Grisanti, Latin America research director at Barclay's Capital Research in New York. "People with cash on hand stepped in" looking for bargains on Tuesday, driving a rebound, he said.

Markets' fates seemed for now tied to a US$700 billion U.S. plan to rescue top financial institutions and restore tightening global credit. U.S. lawmakers rejected a first version of the bailout Monday, sending world markets into a tailspin.

The Dow Jones industrial average plunged 7 percent in its biggest ever one-day decline before rebounding Tuesday by 4.7 percent. European stocks meanwhile seesawed, with most closing up less than two percentage points Tuesday. Asian stocks fell, pushing Japan's Nikkei 225 index to its lowest close in three years.

Latin American markets mirrored U.S. losses and gains more closely, taking a bigger initial beating but rebounding more than any other region on Tuesday.

The current financial crisis threatens Latin America in two central ways: by drying up credit and reducing demand for the commodity exports that have fueled the region's recent economic boom.