Brazil stocks plunge to 4-month low

SAO PAULO (Reuters) - Brazil's main stock index fell to a four-month low on Monday led by a 11.3 percent slump in mining giant Vale and the national currency posted its biggest one-day drop since August as investors sold off emerging market securities.

The Bovespa index of the Sao Paulo Stock Exchange tumbled 6.6 percent to 53,709.11 points, its lowest level since closing at 53,882.71 on September 12. State-controlled oil giant Petrobras declined as crude prices fell, also helping bring the market lower.

Brazil's currency, the real, weakened about 2.5 percent against the U.S. dollar to 1.83 after a sell-off in European and Asian markets spooked investors.

It was the biggest one-day drop for the real since August 29 as investors worried that a $150 billion U.S. fiscal package announced last week may not be enough to avoid a recession.

"The weakening of the real is brisk, specially given that foreign exchange flows aren't that great and the trade balance has had a weak performance at the beginning of the year," said Sidnei Nehme, executive director of the NGO brokerage.

Central Bank President Henrique Meirelles said Brazil's economy is better prepared than ever to weather the current turmoil in global financial markets after cleaning up public finances and building up foreign exchange reserves.

"We took advantage the past five years to do our homework," Meirelles told reporters in Brasilia. "We have no illusion that Brazil would be immune to this crisis, but we reckon that we are ready" to deal with it.

Interest-rate futures jumped on the BM&F commodities and futures exchange in Sao Paulo, reflecting the worsening of investor sentiment.

On the stock market, Vale, the iron ore miner formerly known as CVRD, tumbled 11.3 percent to 41.55 reais, its biggest one-day drop since October 3. The company is preparing to make a bid for Anglo-Swiss rival Xstrata in deal that could be worth $90 billion, local newspapers reported on Monday.

Vale said in a statement it has held talks with Xstrata on a potential acquisition, but those had not yet resulted in a bid.

State-controlled oil company Petrobras, Brazil's most actively traded stock, fell 7.42 percent to 66.47 reais as crude prices fell about 2 percent in London on concerns a U.S. recession would cut energy demand.

(Reporting by Elzio Barreto and Silvio Cascione; Editing by John Picinich)