EMERGING MARKETS-Latam markets decline ahead of key central bank decisions; US midterms in focus

By Sudeshna Ghoshal and Ragini Mathur

Nov 3 (Reuters) - Most Latin American stocks and currencies fell on Tuesday as weaker commodity prices weighed on markets and investors braced for central bank decisions and US midterm election results that could shape the outlook for interest rates and currencies.

MSCI's Latin American currency index .MILA00000CUS eased 0.8%, while its regional equities index .MILA00000PUS dropped 1.4%.

Oil prices fell nearly 2% after President Donald Trump said the US would end billions of dollars in annual military support to Israel after the year-end, although crude remained above $100 a barrel. O/R

The oil rally this year, driven largely by Middle East supply concerns, has fuelled inflation worries and kept central banks cautious.

Policymakers in Brazil and Mexico are due to decide on interest rates this week, with investors closely watching for signals on the policy outlook.

In Brazil, private-sector economists raised their inflation and interest-rate forecasts in the central bank's first weekly survey since President Luiz Inacio Lula da Silva's re-election last week. The surprise result sparked a sharp selloff in Brazilian assets as investors reassessed the fiscal outlook.

Brazil's central bank begins its two-day policy meeting on Tuesday, with a decision due on Wednesday. The meeting will provide an early test of how the election result has shifted expectations for monetary policy after five consecutive 25 basis point rate cuts.

Investors are also watching whether Lula's administration can improve Brazil's fiscal position.

"We will watch whether Congress, particularly the centrist parties, supports the measures the administration wants to implement to bring the fiscal picture under control," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

The real weakened 1.1% against the dollar, while Brazil's Bovespa stock index .BVSP shed 1.8%.

In Colombia, the peso weakened against the dollar, before turning flat, as the central bank said it would buy $2 billion from the government before year-end. Analysts said the operation would reduce the supply of dollars in the local market, potentially adding pressure to the currency.

Colombia's stocks .COLCAP fell 0.5%.

Mexico's peso slipped 0.6%, while the benchmark stock index .MXX rose 1.5% ahead of the Bank of Mexico's policy decision later this week.

A Reuters poll showed the central bank was expected to leave rates unchanged on Thursday, with respondents forecasting no cuts until the second quarter of 2028.

JPMorgan analysts have warned that a rate cut could trigger a "disorderly" slide in the peso against the dollar.

Chile's equities .MMXIPSAGC edged 0.1% higher, while the peso slipped 0.4% as copper prices fell to their lowest level in nearly 2-1/2 months. Copper is Chile's biggest export and a major driver of its currency and equity market.

Markets were also monitoring Tuesday's US midterm elections, which will determine whether Democrats can wrest control of Congress from Trump's Republican Party.

Democrats were widely expected to win the House of Representatives, while control of the Senate remained uncertain.

"If the result raises expectations of larger US deficits or higher yields, that could tighten financing conditions and put pressure on Latam currencies and equities," Abadia said.

Key Latin American stock indexes and currencies at 15:04: