Korea, euro zone fears drag on Brazil stocks, real

(Updates to close)

SAO PAULO, May 25 (BestGrowthStock) – Brazilian stocks and the
country’s currency sank on Tuesday, tracking a global sell-off
as investors saw the euro zone debt crisis and rising tensions
between North and South Korea threatening the still-fragile
global economic recovery.

The benchmark Bovespa stock index (.BVSP: ) tumbled 1.22
percent to 59,184.08, adding to the previous session’s losses.
The index has plummeted about 11 percent over the past nine
sessions.

Brazil’s currency, the real (BRBY: ), weakened 0.21 percent
to 1.868 per dollar and traded as much as 2.1 percent weaker
against the greenback during the session.

Those drops tracked losses around the world as investors
dumped riskier assets and ran to safe havens such as the U.S.
dollar, the Japanese yen and gold.

Investors especially punished the euro, which neared a
four-year low against the dollar and hit an 8-1/2-year trough
against the yen. [ID:nN25121933]

“Two pieces of news soured the mood today. The (first is)
the possible conflict between the two Koreas that reignited
concerns of war in Asia. And the other is the fragile situation
of Spanish banks,” wrote economist Andre Perfeito of Gradual
Investimentos in a report.

Bank of Spain over the weekend moved to rescue regional
savings bank CajaSur, sparking fears that the country’s lenders
could be in tenuous positions.

The European debt crisis, which has roiled markets for
months, remains the biggest threat to a global economic
recovery, Dominique Strauss-Kahn, managing director of the
International Monetary Fund, said at a Sao Paulo event on
Tuesday.

North Korea said on Tuesday it was cutting all ties with
the South and threatened its wealthy neighbor with military
action over alleged violations of its waters off the west
coast. [ID:nSGE64O03B]

Tensions between North and South Korea have spiked after
the March sinking of a South Korean warship, which Seoul blames
on a torpedo fired by the communist North.

On the Bovespa stock exchange, state-controlled energy
company Petrobras (PETR4.SA: ) led losses, falling 2.21 percent
to 26.55 reais as crude oil (CLc1: ) settled down 2.08 percent.

Shares of BM&FBovespa (BVMF3.SA: ), the world’s third-largest
exchange operator by market value, declined 1.26 percent to
10.98 reais.

Banco Santander (Brasil) SA (SANB11.SA: ), the Brazilian unit
of Spanish bank Santander SA (SAN.MC: ), plunged 5.9 percent to
18.82 reais. The stock is not part of the Bovespa index.

Other bank shares also slid, with Itau Unibanco (ITUB4.SA: ),
Brazil’s largest private sector bank by assets, down 2.46
percent to 32.11 reais; Banco do Brasil (BBAS3.SA: ), Latin
America’s largest bank by assets, off 0.2 percent to 25.52
reais; and Bradesco (BBDC4.SA: ) moving down 4.08 percent to
28.67 reais.

Yields on Brazilian interest rate futures contracts
(0#DIJ:: ) broadly dropped on the view that a more sluggish
global economic recovery would reduce pressure on Brazilian
policymakers to hike interest rates.

The yield on the contract due January 2011 (DIJF1: ) ticked
down to 10.88 percent from 10.92 percent. The yield on the
contract due January 2012 (DIJF2: ) fell to 11.96 percent from
12.03 percent.

Both were among the most highly traded contracts of the
day. Investors use the contracts to bet on trends in the
country’s benchmark interest rate, the Selic, which the central
bank last month raised to 9.5 percent from 8.75 percent.

Stock Research

(Reporting by Luciana Lopez; Editing by Dan Grebler)

Korea, euro zone fears drag on Brazil stocks, real