* LatAm stocks sink more than 5 pct on Europe debt woes
* Brazilian real slumps as investors sell liquid assets
* Emerging market spreads widen 24 bps to near 3-month high (Updates to markets close)
By Walter Brandimarte
NEW YORK, May 6 (Reuters) - Latin American stocks slumped more than 5 percent and the Brazilian real sank nearly 3 percent on Thursday as growing fears about Europe's debt crisis caused global markets to sell off indiscriminately.
The MSCI stock index for Latin America <.MILA00000PUS> plunged as much as 9.3 percent in the worst moment of the day but trimmed losses later amid talk that the panic selling was triggered by an erroneous trade from a big Wall Street bank.
Regardless of any possible trade glitch, global aversion to risk grew further as investors worried the European Central Bank was failing to stop Greece's debt crisis from spreading along the euro zone.
Emerging market risk spreads hit their widest levels in three months as foreign investors sold the most liquid assets in the region, including the currencies of Brazil and Mexico.
"A lot of people who had been in carry positions are getting stopped out. At the moment everything with risk associated with it is getting crushed," said Doug Smith, chief economist for the Americas at Standard Chartered Bank in New York.
The Brazilian real
Latin American markets started the day under pressure after ECB President Jean-Claude Trichet said the bank's governing council had finished its meeting in Lisbon without discussing a possible purchase of European government debt.
Many investors would like to see the ECB buy bonds issued by weaker euro zone members such as Greece to support prices and boost market confidence. For details, see [ID:nLDE6450H7].
"The market was expecting something clear from the ECB but it did not get it," said Daniela Blancas, a currency strategist at Scotia Capital in Mexico City.
Although economic fundamentals continue to improve in Latin America, Europe's debt problems have triggered a global reduction in risk appetite.
Yield spreads between emerging market bonds and U.S. Treasuries, an important gauge of risk aversion, widened 28 basis points to 323 basis points, their widest since early February, according to the JPMorgan EMBI+ index <11EMJ>.
In stock markets, the Brazilian Bovespa index <.BVSP> closed 2.31 percent lower and the Mexican IPC <.MXX> declined 1.86 percent.
Argentina's MerVal <.MERV> slumped 5.41 percent as investors aggressively sold riskier markets.
(Additional reporting by Michael O'Boyle in Mexico City and Daniel Bases in New York; Editing by Dan Grebler)