SAO PAULO - Brazil's stocks and currency sank on Tuesday, dragged down by fresh concerns that the recession in the United States is worsening and that Washington's efforts to shore up the economy may not be enough.
The Bovespa index .BVSP of the Sao Paulo stock exchange slumped 3.86 percent to 40,226.44 points as heavy falls in New York and European markets drove investors away from riskier assets.
World stocks fell to a two-week low while all three major U.S. indexes fell more than 3 percent, as mounting concerns about the ability of Washington to restore confidence in the financial system and the economy pushed investors away from stocks and other riskier assets.
This is a vicious cycle. There is no particular news, it's just the bad mood from the crisis, said Rodrigo Nassar, head of trading at the Hencorp Commcor brokerage.
State-run Petrobras (PETR4.SA) was 4,55 percent down at 26.64 reais, also reflecting a slump of more than 6 percent in oil crude prices CLc1 in New York, while mining Vale (VALE5.SA), the world's top iron ore producer, shed 4.79 percent to 29.47 reais.
The mining company shares were also hit by a slide in metal prices, which also weighed on steelmakers such as Usiminas (USIM5.SA), Gerdau (GGBR4.SA) and CSN (CSNA3.SA).
Among financials, BM&F Bovespa (BVMF3.SA), which controls Brazil's biggest stock and commodity exchanges, dropped 3.21 percent to 6.64 reais, while Unibanco (UBBR11.SA) was 5.44 percent off at 13.57 reais and Bradesco (BBDC4.SA) dropped 4.15 percent to 21.50 reais.
Risk aversion also inspired investors to shun the national currency, the real BRBY, which weakened 1.58 percent to 2.316 reais per U.S. dollar.
Interest rate futures <0#DIJ:> were lower across the board after government data showed retail sales volumes in Brazil dropped for a third straight month in December, raising expectations of a further interest rate cut by the Brazilian central bank next month. (Reporting by Renato Andrade and Jenifer Correa)