July 3 (Bloomberg) -- Brazilian stocks fell, capping a weekly decline, as a drop in oil and metal prices sent Petroleo Brasileiro SA and Usinas Siderurgicas de Minas Gerais SA lower.

Petrobras, as Brazil’s state-controlled oil company is known, dropped for a fourth day as crude slumped for a third week of declines. Usiminas, as Brazil’s second-biggest steelmaker is known, fell 1.4 percent as metals dropped in London. The two stocks made up the entire drop in the Bovespa index. Trading volume was a third the three-month average with U.S. markets closed for the Independence Day holiday.

“There are really low volumes today,” said Saulo Sabba, who helps manage the equivalent of $245 million at Maxima Asset Management in Rio de Janeiro. “I would attribute some of the strong fluctuations today to low liquidity.”

The Bovespa slipped 0.2 percent to 50,934.69. Twenty-nine stocks rose on the index, while 33 fell. The gauge dropped 1.1 percent this week. The B&MFBovespa Small Cap Index climbed 0.8 percent today, extending a weekly advance to 2.5 percent. Trading volume was 1.77 billion reais, compared with the 5 billion reais daily average the past three months.

In other Latin American markets, Mexico’s Bolsa was little changed and Chile’s Ipsa advanced 0.4 percent. The MSCI Emerging Markets index was also little changed.

In Brazil, Petrobras slid 0.7 percent to 31.01 reais. Crude oil futures in New York fell below $66 a barrel, a 10 percent decline from this year’s high, marking a market “correction.”

Usiminas dropped 1.4 percent to 40.73 reais. Copper fell in London and New York, heading for a weekly drop, on concerns a weakening U.S. labor market will damage the recovery in demand for industrial metals.

Consumer Stocks Gain

Companies that benefit from consumer demand gained on speculation unemployment will keep falling after industrial production climbed for a fifth straight month.

“The numbers we are seeing out of the economy are already showing a nice recovery” in Brazil, said William Landers, who manages the $4.1 billion BlackRock Global Funds - Latin America Fund, in a Bloomberg Television interview from New York. “In the short-term we think the consumer names have more upside in the next three to six months.”

Tam SA, Brazil’s biggest airline, rose 1.2 percent. Net Servicos de Comunicacao SA, the largest cable provider, 1.9 percent to 19.80 reais.

LLX Logistica SA surged 8.2 percent to 4.35 reais. An agreement with Wuhan Iron & Steel Group to build a $4 billion steel plant in Brazil’s Porto do Acu “is likely to be announced soon,” Itau Corretora analyst Victor Mizusaki wrote in a note. LLX, one of the companies in Eike Batista’s EBX mining group, is building the Acu port.

Duratex Jumps

Duratex SA, the Brazilian maker of bathroom fittings and wood panels that’s taking over rival Satipel Industrial SA, jumped to its highest in nine months on speculation the combination will boost earnings. The stock rose 5.8 percent to 22.79 reais.

“We were analyzing what the merged company would look like and we think the market value is still cheap,” said Januario Hostin Jr., who oversees about 60 million reais at Leme Investimentos in Florianopolis, Brazil. “It will be a strong company, and it’s a cheap price now.”

The Bovespa has rallied 36 percent this year on speculation lower interest rates and rising demand for raw materials will boost Latin America’s biggest economy.

Gains in Brazilian stocks contributed to the emerging market rally that pushed developing countries’ share of worldwide equity value to a record as the fastest-growing economies lured investors amid the first global recession since World War II.

‘Important Economies’

The 22 nations classified as “emerging” by index provider MSCI Inc. comprise 24 percent of world market capitalization, up from 18 percent at the start of this year, the highest proportion since Bloomberg began compiling the data in 2003.

“Brazil is going to become one of the most important economies in the world over the next 10 or 15 years,” Uri Landesman, who manages $2.5 billion at ING Investment Management Inc. in New York, said in a Bloomberg TV interview in New York.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

Last Updated: July 3, 2009 16:46 EDT