Brazil's stocks slipped early on Tuesday as investors worried about the surging price of oil and its potential to weigh on the world economy and the country's vigorous recovery from a recession last year.

"The phrase I'm most hearing now is that now isn't the time to make new bets," said Gustavo Alcantara, a fund manager at Banco Prosper in Rio de Janeiro. "There is some good news, but there are few investors willing to buy on it."

The Sao Paulo Stock Exchange's Bovespa index was down 0.8 percent at 22,641 points in early trade, with market bellwether Tele Norte Leste Participacoes 1.63 percent lower at 37.92 reais. Shares for the phone company account for about 12 percent of the index.

But with oil prices trading at record highs of around $50 a barrel, state energy company Petrobras was up 0.11 percent at 93.10 reais.

The uptick in oil prices could drag on the Brazil's economy, which is expected to grow more than 4 percent this year. Already, the central bank has indicated it will likely make a series of interest rates increases in the coming months to control inflation.

In the currency market, Brazil's real was slightly stronger at 2.872 reais per U.S. dollar compared to 2.873 reais at Monday's close.

Traders said expectations that dollars will continue to flow into the market from recent Brazilian bond issues abroad and the country's burgeoning exports were keeping the real from following stocks lower.

"I thought (oil) would weigh on the market," said Mario Battistel, head of currency trading at Novacao brokerage in Sao Paulo. "But the trade balance has been positive and there is an oversupply of dollars in the market."

(From Reuters, September 28, 2004)

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