Record high oil prices sent Brazilian stocks lower on Friday in a market already concerned about a court ruling next week on the government's pension reform.
The Sao Paulo Stock Exchange' Bovespa index fell 0.78 percent to 21,401 points. Oil prices closed above $46 a barrel in New York for the first time since the New York Exchange started trading oil futures 21 years ago.
"The Bovespa is still being hit by foreign markets because oil prices are again striking record levels," said Paulo Gomes, strategist at Global Invest Asset Management.
Telephone company Telemar's shares, the most heavyweight stock at the exchange, closed 1.32 percent lower before Bovespa index and stock options expirations next week.
But the Brazilian real strengthened 0.49 percent to 3.021 reais per US dollar as weak US economic data hit US Treasuries yields, sending investors to look for higher yields in emerging countries like Brazil, traders said.
"The currency market bucked the trend today. The dollar fell against the real despite a rise in oil prices", said Julio Cesar Vogeler, currency trader at Didier Levy brokerage.
"With the Treasuries fall, investors started to buy Brazilian bonds and that sent the country-risk and the dollar down."
The latest US economic data included a record trade gap in June seen as likely to knock down estimates of second-quarter gross domestic product growth and lower-than-expected consumer confidence index by the University of Michigan.
Experts said the market should trade cautiously until next Wednesday, when Brazil's supreme court is expected to rule whether retired public servants must contribute to the nation's pension fund as imposed by a recent government's law.
A rejection of the law by the court would be a blow for President Luiz Inacio Lula da Silva's plan to cut public spending.
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