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Oil and Gas

Brazil stocks close choppy week on downbeat note

(Updates to close)

SAO PAULO, Oct 23 (Reuters) - Brazil’s stocks closed lower on Friday, ending a choppy week dragged down by a slide in commodities and losses on Wall Street.

Brazil's benchmark Bovespa index .BVSP shed 1.63 percent to 65,058.84 points. The index posted a 1.73 percent loss for the week, despite remaining on track to notch its fourth straight month of gains in October.

“Things closed really ugly abroad,” noted Regis Abreu, a partner at Mercatto Gestao de Recursos, a Rio de Janeiro-based asset management company. “Things here followed that bad mood.”

The Dow Jones industrial index .DJI closed down 1.08 percent as industrial companies' weak results overshadowed stronger earnings from tech giants.

But the country's currency, the real BRBY, strengthened 0.7 percent to 1.714 per dollar, even as the greenback rose against a basket of currencies .DXY.

The real’s surge this year prompted the government to impose a 2 percent tax on capital inflows starting on Tuesday, sending the stock index down 2.88 percent that day, skewing the week’s results.

The real has gained 36 percent so far this year, and economists have expressed skepticism whether inflows will slow in the face of the new tax.

Lower commodity prices also dragged down Brazilian companies, many of which are tied to the trade in raw materials. The 19-commodity Reuters-Jefferies index .CRB fell 0.78 percent, pressured in part by the stronger dollar.

Leading Bovespa index losses were the two most heavily-weighted stocks, Petrobras and Vale.

State-controlled energy company Petrobras PETR4.SA lost 1.35 percent to 36.50 reais, hurt by a 0.85 percent drop in crude CLc1 on worries about weak demand, a lukewarm global economic recovery and packed stockpiles. [ID:nN23500984]

Mining company Vale VALE5.SA, the world's largest producer of iron ore, lost 1.68 percent to 41 reais.

Steelmaker Usiminas USIM5.SA slid 1.88 percent to 51.01 reais. The company posted a 23 percent third-quarter drop in net profit on Wednesday. [ID:nN21480983]

A Barclays Capital report dated Thursday on Usiminas noted “rising risks over the sustainability of the rebound in demand and steel prices.”

Rival steelmakers also fell. Gerdau GGBR4.SA slipped 3 percent to 28.81 reais and CNS CSNA3.SA shed 1.39 percent to 62.96 reais.

BM&FBovespa BVMF3.SA, Brazil's largest stock exchange operator, fell 3.85 percent to 12.25 reais, as investors remained wary of the effects of the capital inflows tax on future trading volumes.

Redecard RDCD3.SA, Brazil's second-largest credit card processing company, also fell 3.06 percent to 28.20 reais even after it said the day before its third-quarter profit had risen 18 percent. [ID:nN2216292]

“Despite the higher-than-expected result, we continue to worry about the sector’s regulatory risk in the short and medium term,” brokerage Link Corretora said in a note. It added it maintained its neutral recommendation on the stock.

Interest rate futures <0#DIJ:> were also broadly lower, only days after the central bank kept interest rates on hold at 8.75 percent and said this level of interest rate was consistent with a scenario for benign inflation. (Reporting by Ana Nicolaci da Costa, Aluisio Alves and Luciana Lopez; Editing by Andrew Hay)

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