By Carla Mozee

Brazilian stocks fell Thursday, with a decline in commodities prices on renewed concerns about debt-stricken Greece pressuring the market's heavily weighted resource stocks.

Brazil's currency was weaker as well following a decision late Wednesday by the central bank to leave its key interest rate unchanged at 8.75%, a record low.

The Bovespa index fell 0.8% to 69,161, with losses led by mining and oil issues. The decline in Brazil was in step with equity markets worldwide, in the wake of media reports that Greece may turn to the International Monetary Fund for support if it doesn't receive aid from the European Union.

"The renewed concerns about Greece may have encouraged some profit-taking," currency strategists at RBC Capital Markets wrote Thursday.

On Wall Street, the S&P 500 Index (SPX) fell 0.3%, led by losses in the energy sector. The Dow Jones Industrial Average (DJI) clung to a modest rise.

Other equity markets in Latin America fell Thursday, with Mexico's IPC and Argentina's Merval each off 0.3%. Chile's IPSA, however, edged up 2 points to 3,801. Chile's central bank will release its decision on interest rates later Thursday, its first since a deadly earthquake struck the country on Feb. 27.

Analysts polled by Dow Jones Newswires expect, on average, the central bank to leave its benchmark TPM rate steady at the historically low level of 0.5%.

In Sao Paulo, mining stocks, which make up about 30% of the Bovespa, were lower. Steel producer CSN (SID) dropped 1.8% and MMX Mineracao lost 2.2%. Gerdau (GGB) shed 1.4% and Vale (RIO) gave up 0.7%.

Shares of oil and gas producer OGX (OGXPY) fell 2% and state-run oil giant Petrobras (PBR) slipped 0.7%, losing grip on a modest rise. Petrobras' fourth-quarter earnings report is due Friday.

Crude for April delivery recently slumped 1.2% to $81.93 and copper and silver futures fell, hurt by a rise in the greenback against the euro and its other rivals following the reports of Greece's possible turn to the IMF. Greek Prime Minister George Papandreou told reporters in Brussels that the country would prefer E.U. measures, but that the IMF remained an option.

The dollar index (DXY), which measures the greenback against a trade-weighted basket of six major currencies, rose 0.9%.

Also in Sao Paulo, telecom shares dropped with wireless-services company Vivo (VIV) down 1.8% and integrated telecom firm Oi (TNE) reversing course to fall 1.2%.

Brazil rate unchanged

In the foreign-exchange market, Brazil's currency lost ground, last trading at 1.781 reals against the dollar compared with 1.766 reals on Wednesday. Among exchange-traded funds, the iShares MSCI Brasil Index (EWZ) lost 1.8%.

The central bank late Wednesday left the key Selic rate unchanged. The vote was split, with five committee members voting to leave the rate unchanged while three wanted a rate hike.

Rising inflation figures and expectations heading into Wednesday's meeting lifted market expectations that the central bank would begin its rate-tightening cycle in March.

But the decision "was not a surprise," said Bertrand Delgado, a senior analyst covering Latin America and emerging markets at RGE Monitor in New York, in a telephone interview.

"Although inflation expectations have moved up very quickly, the long-term and medium-term expectations are still somewhat anchored," close to the central bank's inflation target of 4.5%, he added.

Inflation so far this year has been mainly influenced by seasonal factors and an increase in public fares, especially in transportation, according to Delgado. "Although food continues to pressure inflation, after March we'll see some normalization on inflation dynamics, and that should bring down inflation expectations for this year and perhaps next year."

The central bank will raise interest rates this year, but the question is when, he said. Delgado expects a rate hike at the April meeting, in part because of "political noise" surrounding the possible departure of central-bank chief Henrique Meirelles, who may seek to run for public office in October.

"It's an electoral year, and it is better that the next head of the board hike rates rather than the last one," Delgado commented. RGE expects the Selic rate to end the year at 11.25%.

 
 
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