Brazil stocks fall from record, currency slides

Tue May 20, 2008 10:51am EDT
SAO PAULO, May 20 (Reuters) - Brazil's stock market fell from a record high and the country's currency weakened early on Tuesday, pushed down by fresh fears about inflation at home and abroad.
The Bovespa index .BVSP of the Sao Paulo stock exchange was down 1.1 percent at 72,631.38 points after closing at a record in the last three sessions. Mining and steel sector shares led the index lower, slumping as investors took profits from a recent run-up.
Brazil's real currency BRBY slipped 0.48 percent to 1.658 per U.S. dollar, weakening for the second straight session after closing on Friday at its strongest level since January 1999. The real, which rallied 20 percent in 2007, has already gained more than 7 percent this year.
Brazilian markets fell in tandem with exchanges overseas, weighed down by concerns about inflation. A report showing that core producer prices in the United States rose in April added to concerns about inflation.
Two separate price indexes released on Tuesday also stirred concerns about inflation in Brazil, where the central bank recently raised rates to keep prices in check.
The so-called FIPE index, which tracks consumer prices in Sao Paulo, surged 0.89 percent in the monthlong period through May 15, and the wholesale-heavy IGP-M index soared 1.54 percent in the 30 days through May 10.
The worse-than-expected inflation data sent interest-rate futures <0#dij:> higher on the BM&F commodities and futures exchange in Sao Paulo, reflecting the growing consensus that Brazil's central bank will raise its benchmark lending rate again in June.
"Inflation won't let up in the short term," said Flavio Serrano, an economist at BES Investimento in Sao Paulo. "That's having an impact on the interest-rate futures market."
At the stock exchange, mining giant Vale (VALE5.SA: Quote, Profile, Research) led the Bovespa index lower. Vale, the second heaviest weighted stock in the index, slumped 1.87 percent to 57.60 reais.
Steel-sector shares also weighed on the index, with Usiminas (USIM5.SA: Quote, Profile, Research) falling 2.75 percent to 92.00 reais and CSN (CSNA3.SA: Quote, Profile, Research) tumbling 1.75 percent to 82.89 reais. Steel shares surged in the previous two sessions, buoyed by expectations that global demand for steel products will remain strong.
Aircraft manufacturer Embraer (EMBR3.SA: Quote, Profile, Research) was down 0.29 percent at 17.26 reais, in line with the broader market, despite news that the company had received three orders for executive jets. (Reporting by Todd Benson and Vanessa Stelzer)