Brazilian stocks and bonds fell on Friday as a decline in US Treasury notes set a negative tone for the market, which was already looking for a reason to pocket recent gains. Talk that magazine reports could bring negative political news during the weekend also helped stocks decline, traders said. The Bovespa index of the Sao Paulo Stock Exchange closed 1.03 percent lower at 26,365 points after gaining more than 3 percent in each of the past two sessions.
Shares for bellwether Tele Norte Leste Participacoes, or Telemar, fell 1.14 percent to 38.30 reais while oil company Petrobras ended 0.12 percent lower, at 103.98 reais.
"After two days of hefty rises, the market was needing an excuse to pocket gains and it found it," said Flavio Barros, a trader with Clickinvest brokerage.
"It was an expected profit taking, helped by external factors and a weekend syndrome, with speculation about news from the weekly magazines."
As yields for the benchmark 10-year US Treasury note rose back to almost 4 percent, investors reassessed their global appetite for risk, selling emerging market debt and also putting some pressure on the currency.
The Brazilian real weakened 0.54 percent to 2.427 reais per US dollar, while the country's global bonds due 2040 lost 0.562 in price to bid 119.188 at a yield of 8.184 percent.
Higher interest rates in the world's biggest economy potentially make emerging countries' assets less attractive to foreign investors. But analysts say that, at their current level, US Treasuries' returns are still very low and likely to support yield hunting for more some time.
Despite weakening 1.7 percent during the week, the real is still close to its three-year high of 2.385 per dollar it reached last Friday. With the currency strengthening, the Bovespa index in dollar terms closed on Thursday at its strongest point since 1997, just before the Asia crisis rocked global financial markets.