By Anthony Boadle
BRASILIA (Reuters) - Supporters of leftist leader Luiz Inacio Lula da Silva clashed briefly with opponents of his Workers' Party on Thursday outside the presidential palace, where he was due to be sworn in as President Dilma Rousseff's chief of staff.
Police said they used pepper spray to stop a clash between the rival groups and move away some 300 opposition protesters who were trying to enter the square, occupied by more than 300 pro-government demonstrators.
Hundreds of anti-government protesters calling for Rousseff's impeachment and Lula's arrest also blocked the central Avenue Paulista in Sao Paulo, Brazil's largest city and economic hub.
Brazil's currency and stock market gained sharply on Thursday, as a second day of protests calling for President Dilma Rousseff's ouster boosted bets on her removal.
The appointment of Lula to the cabinet, a move seen by his critics as a way to shield the former president from prosecution in a corruption investigation, triggered large protests in several Brazilian cities on Wednesday.
With Brazil's economy mired in its worst recession in a generation, popular anger at Rousseff is mounting as an investigation into bribes and political kickbacks at state oil company Petrobras taints her inner circle.
The corruption scandal that threatens to topple Rousseff has divided her governing coalition and moved her main partner, the PMDB party, closer to breaking with her government.
Vice President Michel Temer, leader of the PMDB, will not attend the swearing-in of Lula, his aides said, because Rousseff appointed a party lawmaker, Mauro Lopes, as civil aviation minister even though a party convention on Saturday banned its members from taking new posts in her government.
(Additional reporting by Caroline Stauffer; Editing by Daniel Flynn and Frances Kerry)