Brazil's stocks slumped on Friday as emerging market assets lost a bit of luster on rising yields for US Treasuries and fears of higher US inflation.
At the Sao Paulo Stock Exchange, the Bovespa index fell 1.7 percent to 40,154 points after setting an all-time intraday high on Thursday before losing ground.
"I'd say 90 percent of the selling is because of external factors," said Marcelo Voss, chief economist at the Novacao brokerage in Sao Paulo.
Emerging market government bond yield spreads over US Treasuries - perceived as a gauge of risk - widened 7 basis points to 187 basis points, according to the benchmark J.P. Morgan EMBI Plus Emerging Market Bond Index. The Brazil spreads, closely watched by domestic financial markets, widened even more as US Treasury yields rose following a spike in US inflation expectations, as gauged by the University of Michigan.
Brazil's financial markets have soared to a series of record highs over the last year, helped by improving economic fundamentals and a high benchmark interest rate, currently at 15.75 percent, which foreign investors find attractive.
At the stock market, oil driller Petrobras, the heaviest weighted stock in the index, lost 0.93 percent to 46.92 reais. It is expected to post strong quarterly earnings after the market closes.
Jet maker Embraer is also slated to post quarterly results late Friday. Its preferred shares lost 4.17 percent to 19.31 reais.
The Brazilian real weakened some 2 percent to 2.144 per dollar after plunging nearly 2 percent in the previous session - its biggest one-day loss in six months.