(Updates with closing prices, fresh comment)
BUENOS AIRES, Sept 15 (Reuters) - Argentine stocks, bonds and the peso slumped on Monday after investment bank Lehman Brothers Holdings Inc filed for bankruptcy, fanning fears of more financial and economic turbulence in the United States.
The MerVal benchmark index .MERV ended down 5.18 percent at 1,562.14 points, its lowest level since June 2006, with stocks suffering their biggest one-day fall since Jan. 21.
Investors ditched riskier emerging market assets, sending Brazilian stocks .BVSP down a whopping 7.6 percent. The Dow Jones industrial average .DJI was trading 4.4 percent lower when the Argentine market closed.
"The MerVal's huge fall happened on the worst day of the year for global markets ... investors want to be liquid and so they're selling," said Claudio Szlaien, an analyst at Marlon Recursos Financieros.
Greater risk aversion also hit the local debt market. Argentine bonds <AR/BONOS> closed down 2.2 percent on average in over-the-counter trade.
Among the hardest-hit bonds were the Discount denominated in pesos ARDISCP=RASL, which shed 2.8 percent according to the ask price, and the same paper in dollars ARDISCD=RASL, which clocked a loss of 5.3 percent.
The peso weakened due to stronger demand for the safe-haven greenbacks, currency traders said.
In formal trade between banks, where the central bank normally buys or sells dollars to keep the local currency steady, the peso slipped 0.16 percent to end at 3.0850/3.0875 per dollar ARS=RASL.
In informal trade between foreign exchange houses, as measured by Reuters, it weakened by 0.64 percent to 3.1400/3.1425 per dollar ARSB=. (Reporting by Jorge Otaola and Walter Bianchi; Writing by Helen Popper and Hilary Burke; Editing by Diane Craft)