Brazil stocks dip on China policy,US earnings news

SAO PAULO Jan 12 (Reuters) - Brazilian stocks slipped on Tuesday, as investors saw signs of tighter Chinese monetary policy and weaker-than-expected U.S. corporate results as an opportunity to book profits.

The benchmark Bovespa index .BVSP dropped 1.19 percent to 69,596 in early trading, giving up gains in the previous session.

China on Tuesday surprised the markets by raising the proportion of deposits that banks must hold in reserve, a step toward removing liquidity from the market. [ID:nTOE60B095].

In the United States, Alcoa (AA.N) posted worse-than-expected quarterly results and Chevron (CVX.N) warned that its income would be "sharply lower" in a disappointing to start to earnings season. [ID:nN11155201] and [ID:nN11169455]

The United States is the world's largest economy, and China has emerged as an increasingly important player on the global economic stage. Taken together, the two nations wield enormous influence.

In addition to the U.S. and Chinese influences, "there's certainly also some adjustment going on, with profit-taking contributing to today's drop," said Joao Pedro Brugger, an analyst with Leme Investimentos.

The Bovespa index had gained about 7 percent over the past 11 sessions, including a moderate bump on Monday.

Brazil's currency, the real BRBY, weakened 0.4 percent to 1.744 per dollar, as commodity currencies generally slipped amid concerns that demand from China, a major commodities consumer, might slow on the tighter reserve requirements. [ID:nLDE60B1HA]

Commodities slid, too, with the Reuters-Jefferies index .CRB falling 0.59 percent.

That hurt Bovespa heavyweights Vale and Petrobras, which led losses on Tuesday.

Mining company Vale (VALE5.SA), the world's largest producer of iron ore, moved down 1.6 percent to 45.02 reais.

State-controlled energy company Petrobras (PETR4.SA) slipped 1.55 percent to 36.26 reais as crude oil CLc1 dropped 1.31 percent in part on milder U.S. weather. [ID:nSGE60B07K]

Steelmakers also gave ground, with CSN (CSNA3.SA), currently bidding for Portuguese cement producer Cimpor (CPR.LS), dropping 2.01 percent to 57.42 reais. Rival Gerdau (GGBR4.SA) fell 1.01 percent to 29.26 reais and Usiminas (USIM5.SA) shed 1.45 percent to 50.25 reais.

Brazil aircraft maker Embraer (EMBR3.SA) was among stocks which rose. Those shares edged up 0.73 percent to 9.61 reais as the company reported it delivered a record 244 jets in 2009. [ID:nN12187387].

Yields on Brazilian interest rate futures contracts <0#DIJ:> edged higher as one inflation indicator in Brazil suggested higher prices in coming weeks.

Brazil's benchmark IPCA consumer price index is due out on Wednesday.

The yield on the contract due January 2011 DIJF1 ticked to 10.37 percent from 10.34 percent. The yield on the contract due July 2011 DIJN1 inched to 11.24 percent from 11.22 percent.

Both were among the morning's most highly traded contracts.

Investors use the instruments to bet on trends in the country's benchmark interest rate, the Selic, currently at a record-low 8.75 percent.

Policy- makers use an inflation target as a guide in setting rates, so faster inflation could raise expectations of higher rates to come. (Reporting by Luciana Lopez, editing by W Simon)