Brazil's currency, stocks dive on risk aversion

(Updates to close)

SAO PAULO, Sept 4 (Reuters) - Brazil's currency had its biggest one-day drop since January and stocks sank to a one-year low on Thursday as investors sold off emerging market assets on concern about sluggish growth in Europe and the United States.

The Bovespa index .BVSP of the Sao Paulo Stock Exchange lost 3.96 percent to 51,408.54 points, its lowest since closing at 49,815.08 on Aug. 21, 2007.

The index has tumbled about 8.5 percent over five sessions in its worst rout since an 8.8 percent drop over a three-day period between July 1-3.

Brazil's real BRBY slumped 2.3 percent to 1.717 per U.S. dollar, the biggest one-day slide since the currency weakened 2.5 percent on Jan. 21.

"There isn't one factor only, it's as if everyone in the market arrived at the same conclusion at the same time. It finally sank in that the slowdown is really coming," said Marcelo Voss, chief economist at the Liquidez brokerage. "There is a general aversion to risk."

Yield spreads of Brazil's overseas bonds over comparable U.S. Treasuries, as measured by JPMorgan's EMBI+ index, widened, reflecting an increase in investors' risk aversion toward Brazilian assets. The index 11EMJ showed the country's bond spread widened by 8 points to 260.

Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange rose, reflecting the downturn in the currency and equity markets.

European Central Bank President Jean-Claude Trichet said on Thursday that data pointed to weakening growth. Concerns of a slowdown in Europe added to fears of a weak labor market in the United States and pushed equity markets lower from New York to London.