Latin America's fixation with the football World Cup in the next month is likely to lower volumes in the region's financial markets, but opinions differ on whether it will dampen the volatility which rocked emerging markets around the world in the past month.

With Brazil markets closing early on game days, the Argentine stock market bringing in a giant screen to watch the tournament, and traders betting electronically in Mexico, investors' attention could drift unless global markets tremble, analysts said.

Basically we see lower volumes on game days, especially when a country's (team) is playing but also throughout the tournament, said Clyde Wardle, HSBC emerging markets analyst.

It's likely to translate into lower volatility but we could see some quiet spikes, that is you could see large movement but without a large amount of market noise.

Of the 32 teams in the three-week tournament that opened on Friday in Germany, six are from Latin America.

The three largest economies in the region - Brazil, Mexico and Argentina - have all seen wide swings in the prices of their stocks, bonds and currencies in the past month.

The Brazilian real regional bellweather currency, in the past month staged its biggest one-day gain and biggest one-day fall in four years, each of over 4 percent, as emerging markets globally were roiled by the rising interest rates in the United States, Europe and Asia.

So the question is whether the distraction of the World Cup will calm the turbulent financial waters.

Brazil appears to be the only country which closes its markets early for the games on trading days scheduled so far on Tuesday June 13th and Thursday June 22nd.

But then Brazilians will point out they have won the World Cup five times, more than any other country, and they are the only country to have qualified for all 17 World Cup tournaments.

Two-time champion Argentina also has a match during a trading session, when it plays Serbia Montenegro next Friday June 16th.

Lehman Brothers emerging markets analyst John Welch, who worked in Brazil, said trading volumes will definitely fall.

People will go home. I lived in Brazil for the 1986 World Cup and there was always a pre-game rush hour. No cabs anywhere!

And the World Bank in a special World Cup feature posted with a link on its home page Web site (www.worldbank.org) intoned, Studies suggest that success or failure in football (or soccer) may affect a country's economy.

GLOBAL EQUITIES IN DRIVERS SEAT

Argentina was also hit hard by the recent emerging market turmoil. Its Merval benchmark stock market index lost more than 20 percent since April 26.

I have no doubts at all that trading volume will dry out when Brazil and Argentina play, but I don't think this is likely to impact the market trend, said emerging market analyst Ricardo Amorim of West LB.

What has driven volatility up in Latin American markets are equity markets globally and they're likely to remain in the driver seat in upcoming weeks, he said. Thus I don't think the World Cup will matter much in that sense.

Analysts note an increasing correlation between stock markets in the United States and Europe and Latin American emerging market assets, as some investors tend to sell emerging markets as a group in times of risk aversion.

Stock markets globally were shaken in recent weeks by concerns that U.S. interest rates could rise further than previously expected, which would make riskier emerging market investments relatively less attractive.

Investors taking profits on emerging markets and other riskier assets are parking money in the relative safety of the dollar. Outflows from emerging markets equity and bond funds posted their largest weekly cash outflows for two years in late May, Emerging Portfolio Fund Research said.

The World Cup could make buyers for bonds scarce in Latin America, notes IDEAGlobal's emerging markets Enrique Alvarez.

All types of participation from south of the (U.S.) border could dry up for the better part of the three weeks that the tournament is in play, as has been the norm in the market for the last three World Cups.

So market makers in New York and beyond will be faced with less outlet for supply at a time when bearish sentiment coming from U.S. markets and domestic Latin American markets finally starts to filter into the debt realm, he said, adding Volatility will prevail.

In Mexico, which has never won a World Cup, football fever seemed to be less pronounced.

Marco Delgado, a debt specialist for Grupo Financiero BBVA Bancomer, decided to wager on an electronic betting system that Mexico won't win.

I think Mexico won't be a champion and there are some who think it will be and you have to take advantage of that, he said, calculating he would win nearly $200 from Mexico not clinching the cup.

(Additional reporting by Jorge Otaola in Buenos Aires, Todd Benson and Terry Wade in Sao Paulo and Noel Randewich, Sandra Morales and Rosario Torres Limon in Mexico City)

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