Brazil's stocks close at lowest level since 2005

SAO PAULO, Oct 27 (Reuters) - Brazil's BM&F Bovespa stock market closed at the lowest level since 2005 on Monday despite central bank efforts to bolster liquidity and some banks' strong quarterly earnings results.

The central bank took a new step to help the country's liquidity-starved financial system on Monday, cutting reserve requirements on demand deposits, a step it said would add up to 6 billion reais ($2.6 billion) to the financial system.

The currency, whose value has tumbled by about 30 percent, since August, gained 3.2 percent on Monday, closing at 2.253 per dollar.

The central bank has already pumped about $30 billion into the foreign-exchange market this month to ease the impact of the global financial crisis, in the form of dollar swaps, dollar-repurchase agreements and selling some dollar reserves.

It sold another $1.25 billion in dollar-repurchase agreements and later sold $815 million in a currency swap auction. It announced late on Monday it would offer $1.2 billion in a currency swap auction to be held on Tuesday.

The stock market's Bovespa .BVSP index fell 6.5 percent to 29,435.11, as U.S. stocks fell to their lowest levels in 5-1/2 years.

The Bovespa index has lost more than half its value so far this year, with losses accelerating sharply in the past month as foreign investors flee emerging markets and seek shelter from the financial crisis in dollars.

Market heavyweight Petrobras (PETR4.SA) sank 11.2 percent to 18.11 reais as oil prices sank to an 18-month low at $63.22 a barrel. For full story, see [ID:nSYD351781]

Vale (VALE5.SA), one of the world's top three miners, fell 8.2 percent to 20.24 reais as concerns about the impact of tumbling commodity prices continued to weigh on its shares.

Shares of the country's battered banks were unable to buck the trend despite two major high street banks announcing higher profits in the third quarter.

Banco Itau (ITAU4.SA)ITU.N, Brazil's second-largest private-sector bank, announced its third-quarter earnings early in a bid to reassure investors.

It said its net profit jumped 14.6 percent in the third quarter thanks to strong growth in its credit portfolio, but saw loan growth in the country slowing sharply next year as the economy cools.

The country's largest private-sector bank group Banco Bradesco (BBDC4.SA) (BBD.N) reported a 3 percent increase in third-quarter net profit and said it is not exposed to risky foreign currency derivatives that have hit several firms.

Itau shares closed unchanged at 17.50 reais despite the strong earnings report and after climbing during early afternoon trading. Bradesco gave up early gains and fell 4.3 percent to close at 19.14 reais.

Major lender Unibanco UBBR11.SAUBB.N also released its results earlier than scheduled last Friday to reassure investors as its stock plunged more than 22 percent at one point. Unibanco dropped 2.1 percent to close at 10.28 reais. (Reporting by Aluisio Alves and Jenifer Correa; Writing by Stuart Grudgings and Peter Murphy; editing by Gary Crosse)