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Brazilian stocks weighed down by falling world markets

SAO PAULO: Brazilian stocks ended sharply lower on Monday, with blue chip telecommunications issues leading the decline as stock drops around the world weighed on local sentiment, traders said.

The Sao Paulo stock exchange's benchmark share index Bovespa finished 3.75 percent lower at 17,595 points, with bellwether telephone stock Telebras preferred dropping 4 percent in heavy trading.

"I've never seen a market so volatile," said John Carioba, chief trader at Indusval brokerage.

The Bovespa failed to cut down its losses even though Wall Street's Dow Jones industrial average, which is a key gauge for most Latin American financial markets, recouped earlier losses by the time the Brazilian bourse closed. The Dow closed up 18 points at 9.947 after sliding as much as 193 points earlier.

Wall Street's early-morning losses followed a wave of selling in Asian markets that was particularly heavy in the technology sector.

"I think a lot of people are still afraid about what could happen," Carioba said. Markets were bracing for Tuesday's release of the University of Sao Paulo's latest Fipe inflation index.

Investors in Brazil were also nervous ahead of this week's release of the latest reports on US producer and consumer prices, which could again shake up Wall Street and send jitters across Latin America.

Among other telecoms, Sao Paulo mobile telephone firm Telesp Celular lost 6.7 percent to 35.45 reais while Rio de Janeiro land line telephone operator Telemar lost 6.7 percent to 42 reais. Long distance carrier Embratel also shed 6 percent to 49 reais.

Telecom stocks are prone to initial sell-offs due to their high liquidity. The market's overall turnover on Monday however was a low 624 million reais ($358 million).

Another stock that came under the spotlight Monday was Rio de Janeiro's electric utility Light, whose planned auction of 9 percent of its shares was delayed following a change of leaders at the National Development Bank (BNDES), which owns the shares to be sold.

BNDES said after the market's close that the share sale will be pushed back to Thursday from Tuesday at the request of new BNDES President Francisco Gros, who wanted time to review the auction. Light's stock dropped 4 percent to 230.5 reais.

BNDES will sell Light's stake for a minimum price of 506 million reais ($287 million). A source at the BNDES told Reuters late last month that Electricite de France (EdF), which already owns a 32-percent stake in Light, was likely to be the only bidder at the auction.

At Monday's close, the Bovespa index was down 0.37 percent on the month while it was up 3 percent so far this year. -Reuters