Brazil stocks fall on weak U.S. data, commodities

(Updates to close)

By Luciana Lopez

SAO PAULO, June 30 (Reuters) - Brazilian stocks dropped on Tuesday after economic data from the United States showed a recovery in the world's largest economy has not yet gathered steam.

A unexpected slide in U.S. consumer confidence prompted a pullout in both Sao Paulo and New York as investors remained wary of a swift recovery from the global economic crisis. Equity investors in Brazil often track the U.S. market as they gauge global market sentiment.

The benchmark Bovespa index .BVSP dropped 1.29 percent to 51,465.46 points, erasing Monday's gains. The Dow Jones industrial average .DJI fell by 0.97 percent to 8,447.00 points.

"The market opened the day relatively stable, even optimistic," said Rodrigo Silveira, head of trading at Um Investimentos. "What twisted it was the consumer confidence decline in the United States."

Commodities sank as well. Oil CLc1 dived 1.36 percent, after having gained better than 3 percent on Monday. Copper HGN9 dropped 2.21 percent, leading declines for industrial metals.

The falling commodities also helped drag down the Bovespa index, said Debora Morsch, a director at Corretora Solidus.

"Our exchange is heavily tied to commodities," Morsch said. "People got really nervous."

Futures contracts for the Bovespa index <0#IND:> dropped, with the contract due Aug. 2009 INDQ9 down 0.84 percent to 52,020 points.

The Conference Board's U.S. consumer confidence index fell in June, showing Americans' gloom over business and job conditions had yet to brighten.

Business activity in the U.S. Midwest also contracted in June, albeit more slowly than expected. For more, see [ID:nN30517712].

Brazil's currency, the real (BRBY: 株価, 企業情報, レポート), was little changed on Tuesday, gaining less than 0.1 percent to 1.963 reais to the dollar.

Long-term investors are optimistic the Brazilian economy, Latin America's largest, is bouncing back rapidly thanks to a combination of interest-rate cuts and government aid. In a Reuters poll on Tuesday, analysts and fund managers forecast a year-end closing of 55,000 points for the Bovespa index. [ID:nN29355761].

Nevertheless, Tuesday's loss and the 3.26 percent drop in the month of June did not prevent the Bovespa from logging its biggest quarterly gain since the third quarter of 2005, when it gained 26 percent. This quarter's gain stood at 25.75 percent.

PETROBRAS FALLS

The fall in crude helped weigh down preferred shares of state-controlled oil company Petrobras (PETR4.SA: 株価, 企業情報, レポート), which fell 1.82 percent to 32.45 reais, erasing earlier gains.

Preferred shares of Vale (VALE5.SA: 株価, 企業情報, レポート), the world's largest iron ore producer, fell 1.49 percent to 29.85 reais. Chinese magazine Caijing reported that China was expected to relent in its attempt to squeeze a 40-45 percent price cut from global iron ore producers as negotiations stretch beyond Tuesday's deadline. [ID:nPEK112881].

Petrobras and Vale have the biggest weighting in the Bovespa.

Banco Bradesco (BBDC4.SA: 株価, 企業情報, レポート), Brazil's second-largest private bank, fell after a report by Valor Economico on Tuesday said the bank might purchase a minority stake in Porto Seguro (PSSA3.SA: 株価, 企業情報, レポート), the fifth-biggest insurer in the country.

Bradesco dropped 0.75 percent to 28.98 reais. Common shares of Porto Seguro gained 3.72 percent to 15.35 reais.

Yields on interest rate futures contracts <0#DIJ:> rose for shorter-term contracts, though the yield on the Jan. 2011 contract DIJF1, the day's most highly traded, fell 7 basis points to 9.99 percent. (Editing by Dan Grebler)