By Carla Mozee

Brazilian stocks fell Monday as investors moved with caution as strategists continued to raise expectations for higher inflation ahead of the central bank's interest-rate meeting this week.

Brazil's Bovespa fell 0.9% to 68,871, its first loss since April 19. The index is now up 0.4% on a year-to-date basis.

Few stocks on the index gained ground. Packaging producer Klabin (KLBAY) rose 2.8% and chemicals maker Braskem (BAK) rose 1.2%.

Among heavily weighted resource stocks, shares of steel maker Gerdau (GGB) lost 0.5%, iron ore producer Vale (RIO) fell 0.5% and oil producer Petrobras (PBR) down 2% as crude oil for June delivery fell 1.1% to $84.20.

Oil prices were weighed by weakness in the euro against the dollar on concerns that Germany may be slow in providing financial aid to debt-strapped Greece. German Chancellor Angela Merkel said assistance will be given to its euro-zone partner only if it's absolutely necessary, and that Greece needs to meet certain conditions.

In Brazil early Monday, a weekly survey released by the central bank showed economists and strategists, on average, expect inflation as measured by the IPCA index to end at 5.41% this year, up from last week's reading of 5.32%. The forecast remains above monetary policy makers' yearly inflation target of 4.5%.

Readings on consumer prices and inflation have been moving higher amid recovery from recession in Latin America's largest economy.

With the central bank facing rising inflationary pressures, the survey showed strategists now also expect the key Selic interest rate to be raised to 11.75%, compared with last week's consensus estimate of 11.25%. The Selic currently stands at a record low 8.25%.

But Brazil's currency rose as investors positioned themselves ahead of a possible rate hike late Wednesday. The real rose to 1.745 per dollar compared with 1.762 on Friday. Strategists polled in the central bank's survey still expect the real to reach 1.80 by year's end.

Elsewhere in the region, Mexico's IPC index fell 0.2% to 33,771.55, with shares of market heavyweight America Movil (AMX) down 0.2%, fixed-line operator Telmex (TMX) off 0.9% and copper miner Grupo Mexico lower by 1.2%.

But losses were limited in part by a 0.5% gain in shares of Walmex (WMMVY) and a 0.4% gain in shares of Cemex (CX). The cement maker was slated to release first-quarter results on Tuesday.

Chile's IPSA fell 0.2% to 3,826.93 and Argentina's Merval fell 0.1% to 2,472.71.

 
 
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