FINANCIAL MARKETS : Resignation Sends Brazil Stocks Down

Brazilian stock prices posted their largest single-day drop in seven months after this weekend’s abrupt resignation of Rubens Ricupero as finance minister, traders said.

Most international markets were quiet Monday due to the U.S. Labor Day holiday. Stock prices slid in Tokyo and Frankfurt, following the dollar lower.

In Brazil, the Bovespa stock index in Sao Paulo tumbled 10.5%, closing at 48,040. In Rio de Janeiro, the IBV index fell 10.0% to 17,734. Investors were worried that Ricupero’s comments that he had slanted economic statistics to aid pro-business presidential candidate Fernando Henrique Cardoso could hurt Cardoso’s chances.

Brazilian law prohibits government backing of political candidates, and Cardoso’s opponents petitioned the electoral tribunal to force him out of the race.

Despite the big drops, the Bovespa index remains up 72% in U.S. dollar terms this year.

“Of course it’s bad,” said Paulo de Tarso, portfolio manager at Banco Tendencia in Sao Paulo. However, the incident isn’t likely to prevent Cardoso from winning the election, he said.

Among Monday’s market highlights around the world:

* Chinese domestic stocks staged a stunning bull run in Shanghai on Monday with a 13% surge in the A-share index. Institutions, major individual shareholders and small investors went on a buying spree, their confidence boosted by news that Beijing was pressing ahead with a plan to invite foreign funds into the market.

* The dollar fell 0.61 to 99.05 Japanese yen before recovering about 0.20 yen later in London trading.

* In Tokyo, the 225-issue Nikkei stock average shed 244.65 points, or 1.18%, to close at 20,409.18.

The sharp fall “mainly reflects the weakness of the dollar against the yen,” Merrill Lynch trader Dan O’Keefe said in Tokyo.

* In Germany, the slumping dollar and falling bond prices helped pull Frankfurt stocks lower. The DAX stock index closed at 2,174.52, down 30.19 points, or 1.4%.

* Mexico’s Bolsa index fell 8.80 points, or 0.33%, to close at 2,666.03, its eighth consecutive loss. Shares in Mexico’s two biggest airlines, Aerovias de Mexico and Mexicana de Aviacion, tumbled more than 6% after the sudden resignation of the chairmen of both carriers over credit problems.

* Gold closed in London at $386.85 an ounce, down from $387.25 on Friday.