Bloomberg News

Brazil Stocks Fall as Commodities Slump; Colombia Shares Rally

September 01, 2008

Brazilian stocks fell for a second day, the biggest decline among Latin America markets, as slumping metal and oil prices and concern about slowing global growth sent the nation's largest commodity producers lower.

Cia. Vale do Rio Doce slid as nickel, which last year accounted for about one-third of revenue, dropped 4.3 percent in London. Gerdau SA (GGBR4) and Usinas Siderurgicas de Minas Gerais SA led steelmakers lower. Oil company Petroleo Brasileiro SA (PETR4) declined as crude prices fell to its lowest in more than four months after Hurricane Gustav weakened. Real estate companies rose after Gafisa SA (GFSA3) said it would buy rival Construtora Tenda SA.

``We've see that the euro zone and the U.S. are entering a phase of slower growth, with a light recession, and for commodities that's bad,'' said Debora Morsch, who helps manage the equivalent of $305 million at Solidus Brokerage in Porto Alegre, Brazil. Investors ``are thinking that there was a bubble in commodities; that prices aren't going back to their previous levels, and even have room to fall a little more.''

The Bovespa dropped 462.44, or 0.8 percent, to 55,217.97 at 10:47 a.m. New York time. Mexico's Bolsa advanced less than 0.1 percent. Colombia's IGBC index jumped 1.5 percent after the government lifted capital controls. U.S. markets were closed for the Labor Day holiday, while stocks in Europe and Asia declined.

In Brazil, economists lowered their forecast for economic growth next year for a fourth straight week to 3.6 percent from 3.65 percent last week, a central bank survey released today showed. Economists also cut their forecast for industrial output next year for the first time to 4.20 percent from 4.23 percent.

Vale Drops

Vale, the world's biggest iron-ore producer, fell 1.5 percent to 37.44 reais. Copper for delivery in three months dropped 1.8 percent in London amid concern a spreading global economic slowdown will reduce demand. Platinum, lead, zinc and aluminum prices also fell.

Gerdau, Latin America's largest steelmaker, dropped 1.8 percent to 30.14 reais. Usiminas, as the second-biggest steelmaker is known, fell 1.2 percent to 56.50 reais.

Petrobras slumped 1.7 percent to 34.30 reais. Oil declined as much as $4.83 a barrel in New York, reversing earlier gains, after Hurricane Gustav failed to gain strength before striking the Louisiana coast.

The Bovespa index, almost half of which is made up of materials producers, has fallen 13 percent so far this year as commodities prices retreat from records on concerns that demand will slow.

Brazil's real fell the most in more than a week today on slumping commodity prices. The real weakened 0.8 percent to 1.6451 per dollar from 1.6315 on Aug. 29. Brazil's real has advanced 8.2 percent this year, the biggest gain among the 16 most-actively traded currencies tracked by Bloomberg News.

Homebuilders Rally

Homebuilder Tenda jumped 18 percent to 4.44 reais after surging as much as 32 percent. As part of the transaction, Gafisa will have a 60 percent stake in Tenda, while Fit Residencial Empreendimentos Imobiliarios Ltda., the Gafisa subsidiary focused on low-income housing, will be part of Tenda, Sao Paulo-based Gafisa said.

Rival Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil's biggest builder, added 2.1 percent to 20.92 reais. Rossi Residencial SA (RSID3), the third-largest, rose 2.5 percent to 10.25 reais.

The acquisition may lead the way for further consolidation in the industry at a time when share prices are depressed due to concern that rising rates will slow demand, Morsch said in a phone interview.

``There were big expectations placed on the industry,'' she said. ``The domestic outlook was looking good, but inflation and higher rates are getting in the way.''

Brazilian economists kept their inflation forecast for 2009 unchanged at 5 percent for a seventh consecutive week, higher than the central bank's 4.5 percent goal, on concern domestic demand will rise faster than supply.

Strong consumer demand is offsetting a drop in prices of vegetables, cattle and soybeans, which prompted economists to cut inflation estimates for this year, the central bank survey said.

Colombia Jumps

Colombia's IGBC rose after the Finance Ministry said it would lift requirements that foreign investors must deposit 50 percent of their stock investments in the central bank for six months or pay a fine. Colombia imposed requirements on investments entering the country in May 2007 and toughened the rules a year later.

State-controlled oil company Ecopetrol SA (ECOPETL) led gains, rising 1.5 percent to 2,655 pesos.

To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net


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