* Petrobras, Bovespa set for worst day since March * Coronavirus aid extension in Brazil to be discussed this week * Mexican peso down for sixth straight session By Susan Mathew Brazil"s benchmark Bovespa index tanked almost 6% on Monday as shares of oil major Petrobras plummeted 21% following the ouster of its investor-backed chief executive. After weeks of sparring between CEO Roberto Castello Branco and Brazilian President Jair Bolsonaro on fuel prices, former Defense Minister and retired army general Joaquim Silva e Luna, who has no oil and gas experience, was appointed to take over. Petrobras has been raising fuel prices since February, which led analysts to downgrade its shares on concerns of possible political interference. Castello Branco"s ouster could force a broader shakeup at Petrobras, which has steered toward more market-friendly and less politically driven policies in recent years. Petrobras shares were on course to post their sharpest one-day decline since March last year, as was the Bovespa. "The reversal of these types of practices by Bolsonaro early in his administration was a key credit positive for Brazil"s quasi-sovereigns," said Citigroup strategists. "A reversal of this policy is a clear credit negative." Banco do Brasil, caught up in a spat with Bolsonaro over branch closings, slumped 10%, while power company Eletrobras skidded 7% amid signs of the president"s interference in the power sector. Brazil"s real fell 2.3% to 5.51, hitting lows not seen since November last year, while the cost to insure exposure to Brazil"s sovereign debt jumped 22 basis points from Friday"s close. "Local assets will underperform across the board in the very short-term," Citigroup warned, adding that a break in the key 5.50 level of dollar-real pair could see further continuation of weakness in the real. Investors also have their eyes on a discussion regarding an extension of Brazil"s emergency aid bill this week, with eyes on cost cuts elsewhere to keep spending within the limit. Worries about fiscal spending have dominated investors" sentiment, and saw the real lose about 22% last year, making it one of the worst performing emerging market currencies. This year, the currency is down about 6% so far. Other currencies in Latin America also dropped, pressured by their latest adversary - rising U.S. Treasury yields. In its sixth straight day in the red, Mexico"s peso slid 1.7% to hit its lowest since early November. A deep freeze in Texas last week affected fuel supplies and raised concerns about a hit to factory activity in the country, weighing on the currency. Colombia"s peso slipped despite rising oil prices, while surging copper prices limited losses for Chile"s peso . Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1404.55 -1.78 MSCI LatAm 2274.27 -5.35 Brazil Bovespa 111714.77 -5.67 Mexico IPC - - Chile IPSA 4555.90 -1.47 Argentina MerVal 50620.41 -0.73 Colombia COLCAP - - Currencies Latest Daily % change Brazil real 5.5110 -2.33 Mexico peso 20.7700 -1.66 Chile peso 709.9 -0.27 Colombia peso 3606 -1.02 Peru sol 3.6508 0.02 Argentina peso 89.4300 -0.30 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Steve Orlofsky)