Latin American stocks whipsawed on Tuesday as continuing concerns over Spain's financial health and possible contagion to Italy contributed to volatility.
The MSCI Latin American stock index reversed its biggest daily loss in over a week, rising 0.1 percent to 3,380.20. The index has remained largely rangebound between 3,320 and 3,440 points for the past three weeks.
Shares fell in early trading as investors continued to digest developments in the euro zone debt crisis. Spain's 10-year bond yields rose to near euro-era highs on concerns that a bank bailout would weigh on the country's finances and put other holders of government debt further down the line for repayment.
Attention also turned to Italy, after Austria's finance minister said the euro zone's third largest economy may need a financial rescue because of its high borrowing costs.
"It's not just Spain and Italy, the euro as a whole is facing a test," said Alexandre Ghirghi, a partner with Metodo Investimentos in Sao Paulo. "One thing is to take measures that provide short fixes, another is to face real problems head-on, which would require a much closer fiscal union."
International Monetary Fund Managing Director Christine Lagarde helped calm markets later in the session, after she called for "decisive steps" by European policymakers to deal with the region's financial crisis.
Ghirghi said markets should remain choppy, with attention focused on the Greek election on June 17. Fears that parties opposed to its current bailout plan may force a disorderly exit from the euro zone were rekindled by a report that EU officials were considering ways to manage the fallout.
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