Brazil real gains on inflows, stocks near flat

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SAO PAULO, May 9 (Reuters) - Brazil's currency gained on Friday on rising investment inflows, while stocks seesawed near the unchanged mark as gains in state-controlled oil company Petrobras were offset by a slump in airlines and retailers.

The Bovespa index .BVSP of the Sao Paulo stock exchange dipped 0.11 percent to 69,645.7 points. World oil prices surged record highs, helping boost Petrobras but the higher fuel costs prompted a selloff in shares of airlines Gol and TAM.

The real BRBY strengthened 0.47 percent to 1.686 per U.S. dollar, buoyed by rising inflows and as exporters sold greenbacks after the recent decline in the Brazilian currency.

Concerns that the government would raise the IOF financial transactions tax on foreign investment in the domestic bond market eased, also helping bolster the real.

"This was the talk of the week," said Renato Schoemberger, a trader at the Alpes brokerage. "But I think the IOF tax is not coming."

Investment flows to Brazil, Latin America's largest economy, are expected to keep growing now that the country won an investment-grade credit rating from Standard & Poor's.

Increased dollar inflows will likely further prop up the real, which is trading near its strongest level in nine years and has proven to be less susceptible to market jitters than the Bovespa.

Concerns that rising inflation at home will prompt Brazil's central bank to further raise interest rates also weighed on the Bovespa.

Data released on Friday showed that the benchmark IPCA consumer price index jumped 0.55 percent in April after rising 0.48 percent in March, lifting 12-month inflation well above the government's year-end target of 4.5 percent.

A separate report showed that the wholesale-heavy IGP-M index soared 1.36 percent in the first 10 days of May, up from a 0.33 percent increase a month earlier. For details, see [ID:nN09458403]

The inflation data sent interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange sharply higher, with most heavily-traded January 2010 contract climbing a steep 17 basis points.

At the stock exchange, banking shares helped push the Bovespa index lower, slumping in line with their peers overseas on worries about the financial sector following record losses at the world's largest insurer, U.S.-based AIG (AIG.N).

Banco Bradesco (BBDC4.SA) fell 0.5 percent to 38.2 reais, Banco Itau ITAU4.SA lost 0.7 percent to 46.9 reais and Unibanco UBBR11.SA dropped 0.9 percent to 10.56 reais.

Airlines TAM Linhas Aereas (TAMM4.SA) and Gol Linhas Aereas (GOLL4.SA) slumped 2.05 percent to 37.21 reais and 2.07 percent to 27 reais, respectively, after oil prices surpassed $126 a barrel, stoking concerns about rising jet fuel costs.

Oil giant Petrobras (PETR4.SA) gained 1.49 percent to 45.67 reais, tracking gains of nearly 2 percent in crude prices in London and New York. [ID:nSP115466] (Reporting by Elzio Barreto and Silvio Cascione; editing by Gary Crosse)