Brazil stocks fall; rate futures yields down

By Luciana Lopez

SAO PAULO, July 2 (Reuters) - Brazilian stocks fell early on Thursday, tracking losses in New York, as commodities fell and weak economic data in the United States boosted concerns over the extent and duration of the global recession.

Brazil's currency, the real (BRBY), slumped 0.9 percent against the dollar to 1.948 reais to the dollar.

The benchmark Bovespa index .BVSP fell 1.1 percent to 50,969.99, echoing a 1.9 percent loss in the Dow Jones industrial average .DJI. U.S. equities fell after payrolls data showed more Americans than expected lost their jobs in June.

"Oil is the principal transmission route from New York equities to here," Andre Perfeito, an economist with Sao Paulo-based Gradual Investimentos, said in a phone interview. "The U.S. economy, in a weak spot, is forcing oil down."

State-controlled energy giant Petrobras (PETR4.SA) led declines, falling 2 percent to 31.18 reais on the heels of a 3.3 percent decrease in oil CLc1 prices.

Other commodities also fell, with copper HGN9 down 1.9 percent .

Preferred shares of the world's biggest iron ore producer, Vale (VALE5.SA), were flat at 30.12 reais. Brazilian exports of iron ore dropped 17 percent in June from a year earlier, the Trade Ministry said on Wednesday. Morgan Stanley analysts reviewed their rating and price target on Vale, saying this year's rise in the stock might cool off.

Petrobras and Vale are the two most heavily weighted stocks in the index.

Steelmakers also fell, with Usiminas (USIM5.SA) down 1.8 percent to 41.95 reais and Gerdau (GGBR4.SA) down 1.65 percent to 20.25 reais.

Limiting losses were common shares of Banco do Brasil (BBAS3.SA), which gained 1.31 percent to 21.63 reais. Rival bank Itau Unibanco (ITUB4.SA) added 0.29 percent to 31.20 reais.

YIELDS DOWN

Yields on interest rate futures contracts <0#DIJ:> also nosed downward, with the contract due January 2011 DIJF1, the most heavily traded in the early market hours, down to 9.91 percent from 9.96 percent.

"Inflation in Brazil has been very well-behaved," Perfeito said. That gives space for the central bank to continue tightening monetary policy, he said.

When the Brazilian central bank cut the benchmark interest rate, the Selic, to a record low of 9.25 percent in June, policymakers implied further cuts could be coming, though more "parsimoniously."

Data released on Thursday showed that consumer prices in Sao Paulo, Brazil's biggest city, rose 0.13 percent in June over May, a deceleration from the 0.33 percent increase the month before. See [ID:nN01337405]. (Editing by Leslie Adler)