* Bovespa index down 1.04 pct, Mexico's IPC down 0.46 pct

(Updates to close)

By Luciana Lopez and Michael O'Boyle

SAO PAULO/MEXICO CITY (Reuters) - Latin American
stocks slipped Monday, notching their lowest close in almost
two weeks, as Brazilian mining company Vale dropped on takeover
rumors and a bomb threat at Mexico City's stock exchange
rattled investors.

The MSCI Latin American stocks index fell
0.68 percent and closed at its lowest point since Aug. 11.

The Thomson Reuters Latin America total return stock index
retreated 1.4 percent.

Heavyweight Vale was among the hardest-hit
stocks of the day, losing 2.42 percent even as Brazil's Bovespa
stock index fell 1.04 percent. Rumors were rife that
the company could be eyeing Canada's Potash Corp .

"Vale really weighed today," said Marianna Costa, an
economist with Link Investimentos in Sao Paulo.

The company released a statement late in the day denying
the purchase rumors, calling speculation that it had bid to
acquire the Canadian company "unfounded."

"The uncertainty around the takeover rumors is adding to
volatility," said Adriano Fontes, a fund manager with Oren
Investimentos in Rio de Janeiro.

Fontes said sliding stock prices in China also hurt Vale,
whose biggest customer is China.

But without major economic indicators on tap, markets were
largely looking for direction through the session, Costa said.

"There are still a lot of doubts about the overall
direction of the economy," she added.

Also falling were shares of state-controlled energy giant
Petrobras , which lost 0.45 percent as crude oil
ended lower for a fourth day in a row.

In Mexico, the IPC stock index lost 0.46 percent,
with losses accelerating toward the end of the session after an
anonymous threat was called into police. Officials found no
evidence of a bomb.

"After the news that we saw a bomb threat in the stock
exchange, the market fell more, but U.S. markets also increased
losses, so we do not think it had such a direct effect," said a
trader in Mexico City.

Mexican retail sales fell in June compared with May,
dealing a setback to the country's recovery from recession and
keeping pressure off the central bank to raise borrowing costs

Shares of Walmex lost 2.14 percent, leading
losses on the IPC. In addition, cement company Cemex
dropped 2.31 percent to trade at a 13-month low.

Chile's blue chip IPSA index rose 0.23 percent.

Local data showed Chile's trade surplus narrowed as imports
surged even as export growth remained strong.

Regional energy group Enersis put on 0.94 percent,
while retailer Cencosud added 0.69 percent.
(Additional reporting by Lizbeth Salazar in Mexico City;
Editing by Kenneth Barry)