Brazilian stocks slumped on Friday in tandem with Wall Street, where worse-than-expected employment data renewed fears of 1970s-style US stagflation. The Bovespa index of the Sao Paulo stock exchange ended 2 percent lower at 69,785.87 points, a day after rallying almost 4 percent.
At the stock exchange, mining giant Vale, the second-heaviest-weighted stock in the index, fell 2.6 percent to 51.60 reais as investors took profits on a 4.23 percent surge on Thursday. Market bellwhether Petrobras only managed to eke out a 0.06 percent gain even as US crude prices jumped nearly 9 percent. Brazil's state-run oil company ended trade at 47.59 reais.
The Brazilian real weakened 0.5 percent to 1.64 per US dollar but was still trading near its strongest level since January 1999. The real has gained more than 8 percent so far this year, adding to a 20 percent surge in 2007. US stocks plunged on Friday, with the Dow falling more than 3 percent, after data showed US unemployment rate jumped in May to its highest in more than 3-1/2 years and oil prices surged to a new record above $139 a barrel.
"The context abroad is still prone to trouble. We think the US economic context hasn't gone through the worst yet," said Zeina Latif, chief Brazil economist at Banco Real. But she added: "I am not worried about significant knock-on effects on Brazil, even though markets will remain sensitive."
Interest-rate futures on the BM&F commodities and futures exchange in Sao Paulo were mostly higher on bets that Brazil's central bank will continue to raise interest rates to contain inflation. On Wednesday, the bank raised rates for the second time in just over two months, by 50 basis points, to 12.25 percent. In a Reuters poll on Thursday, eight of 10 economists predicted another 50-basis-point increase in July.