Brazil's stocks fall on record oil prices; real up

Tue Feb 19, 2008 4:59pm EST
(Updates to close)
SAO PAULO, Feb 19 (Reuters) - Brazil's stock market fell on Tuesday as a decline in U.S. markets raised aversion to riskier emerging market securities and airline shares tumbled on higher oil prices, while the country's currency firmed to its strongest level since March 2000.
The Bovespa index .BVSP of the Sao Paulo Stock Exchange dropped 0.8 percent to 62,296.54 points, erasing earlier gains.
U.S. markets reversed earlier gains in late trading as a surge in oil prices to a record high above $100 a barrel raised concern about the fallout on consumer spending.
Brazil's currency, the real BRBY, gained 0.17 percent to 1.734 per U.S. dollar, near its strongest level since March 2000 even after the central bank bought dollars on the spot market.
The real traded as high as 1.729 reais per dollar, but pared gains as investors snapped up the U.S. currency.
"People took advantage to buy dollars, given the level it reached and it ended up balancing out a bit the exchange rate," said Mario Battistel, foreign exchange manager at the Fair brokerage.
Interest-rate futures <0#dij:> on the BM&F commodities and futures exchange in Sao Paulo were mostly higher, as investors remained cautious about the U.S. economy.
On the stock market, shares of Brazilian airlines slumped on concerns surging oil prices may hurt profitability; fuel costs make up the bulk of operating expenses. TAM Linhas Aereas (TAMM4.SA: Quote, Profile, Research), Brazil's biggest airline, tumbled 7.38 percent to 35.75 reais.
Low cost airline Gol Linhas Aereas Inteligentes (GOLL4.SA: Quote, Profile, Research) slumped 4.98 percent to 30.52 reais. UBS Pactual, which has a "sell" rating on Gol shares, slashed its price target for the stock to 26 reais from 38 reais, citing "very disappointing" fourth-quarter results and expectations for lower revenues and weaker margins in 2008.
Mining giant Vale (VALE5.SA: Quote, Profile, Research), the second most widely traded stock in Brazil, fell 0.49 percent to 48.62 reais, after a 5.08 percent rise on Monday. The company late on Monday said it reached its first iron ore price deal for 2008 in Europe with steelmaker ThyssenKrupp. For details please see [ID:nN19251222].
State-controlled oil company Petrobras (PETR4.SA: Quote, Profile, Research), the most heavily weighted stock in the Bovespa index, rose 0.41 percent to 85.30 reais
Petrochemical companies Ultrapar (UGPA4.SA: Quote, Profile, Research) climbed 4.12 percent to 60.60 reais, while Braskem (BRKM5.SA: Quote, Profile, Research) gained 0.70 percent to 12.96 reais. UBS Pactual raised its ratings on the two stocks to "buy" from "neutral," saying a sell-off of the stocks was overdone. (Reporting by Elzio Barreto and Fabio Gehrke; editing by Leslie Adler)