* Rising U.S. Treasury yields weigh on EM assets * Brazilian stocks slump 2.3% * Aeromexico rallies on debt restructuring plan (Updates prices) By Ambar Warrick and Susan Mathew Oct 4 (Reuters) - Brazil"s real sank 1.5% on Monday, on course for its worst session in a month and leading losses across Latin American currencies on concerns over the Chinese economy and rising U.S. Treasury yields. The real last traded at 5.4516 against the dollar, with political uncertainty also coming into play after anti-government demonstrations broke out in major capitals over the weekend. Amid growing discontent with President Jair Bolsonaro"s administration, a potential change of government next year could also result in sudden changes to fiscal policy. The government is already struggling with stretched fiscal spending due to the COVID-19 pandemic. "The window to pass quality reforms that would contribute to increased productivity and longer-term growth is closing, leaving the government scrambling to find ways to finance its re-election campaign," Wilson Ferrarezi, economist at Brazil Research at TS Lombard, wrote in a note. A rise in U.S. Treasury yields weighed on most emerging market assets, as the gap between risky and risk-free debt narrowed. The U.S. dollar benefited from safe haven demand after reports said China"s second-largest property developer, Evergrande, was considering a $5 billion asset sale to fund its debt repayment. Mexico"s peso fell 0.6% despite a slight uptick in consumer confidence, while Chile"s peso fell 0.3%, despite rising copper prices. Chile"s top miners saw their production of copper fall in August, state copper commission Cochilco said on Monday, impacted in part by a strike at a mine owned by miner Codelco. "With new and more structural growth risks emerging from China, U.S. yields rising and stagflation worries gaining prominence, we believe the chances are for a more sustained shift lower in EM FX risk appetite," said strategists at JPMorgan, adding that they are now "underweight" on EM currencies. Losses in crude exporter Colombia"s peso were capped by a surge in oil prices. Stocks in the region joined a global rout in equities, with Brazil"s Bovespa index sinking 2.3%, while an 2% slide in Chile"s IPSA index took it to two-month lows. Colombian stocks jumped to an eight-month high as oil giant Ecopetrol surged almost 2% tracking oil prices. Shares in Mexican carrier Grupo Aeromexico jumped almost 6% after the company said it had presented a restructuring plan to debtors as part of its Chapter 11 bankruptcy process in the United States. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1236.12 -0.84 MSCI LatAm 2210.54 -2.26 Brazil Bovespa 110332.99 -2.27 Mexico IPC 50899.67 -0.31 Chile IPSA 4241.65 -1.97 Argentina MerVal 77174.69 -0.582 Colombia COLCAP 1379.17 0.65 Currencies Latest Daily % change Brazil real 5.4516 -1.52 Mexico peso 20.5150 -0.42 Chile peso 805.6 -0.50 Colombia peso 3790.03 -0.07 Peru sol 4.131 -0.16 Argentina peso 98.8500 -0.05 (interbank) (Reporting by Ambar Warrick Editing by Mark Heinrich and Sonya Hepinstall) Our Standards: The Thomson Reuters Trust Principles.