Brazil stocks creep higher, currency slumps 4 pct

SAO PAULO Dec 2 (Reuters) - Brazilian stocks crept higher on Tuesday as hopes for a bailout of the struggling U.S. auto industry helped temper concerns about the global economic downturn, while the country's currency slumped amid surging demand for dollars.

The Sao Paulo Stock Exchange's benchmark Bovespa index .BVSP was up 0.88 percent at 35,046.52 points in early afternoon trading, clawing back from a 5 percent drop on Monday as investors snapped up beaten down stocks.

The index seesawed above the break-even mark as executives of the big-three U.S. automakers -- General Motors, Ford and Chrysler -- headed to Washington to make another plea for a $25 billion bailout before the U.S. Congress.

Hopes that the lawmakers would give in and back a rescue plan for the ailing U.S. auto industry helped brighten the mood in an otherwise gloomy market worried about the seemingly relentless global economic slowdown.

Official data released on Tuesday showed that industrial production in Brazil tumbled a hefty 1.7 percent in October as the global financial crisis prompted manufacturers to scale back production.

Airline stocks help lift the Bovespa on Tuesday as world oil prices briefly slid to below $48 a barrel. TAM Linhas Aereas (TAMM4.SA), Brazil's leading carrier, jumped 9.56 percent to 17.53 reais while Gol Linhas Aereas (GOLL4.SA) rose 0.54 percent to 9.33 reais.

Shares in processed foods company Sadia SDIA4.SA were up 2.97 percent at 3.12 reais, buoyed by news that the company had reduced its exposure to risky foreign currency derivatives to $966 million from $2.3 billion in September.

In the foreign exchange market, the Brazilian real BRBY slumped 4 percent to 2.416 per dollar in light volume amid surging demand for greenbacks, traders said.

The real, which has shed more than a third of its value since hitting a nine-year high in August, had gained almost 1 percent early in the session but reversed course as investors scrambled for safe-haven dollars.

Interest-rate futures <0#DIJ:> at the BM&F commodities and futures exchange fell across the board after data showed that consumer prices in Brazil's largest city, Sao Paulo, rose less than expected in November. (Reporting by Jenifer Correa; Writing by Todd Benson, Editing by Chizu Nomiyama)