Bloomberg News

Brazil Stocks Fall on Concern Growth Is Slowing; Bolsa Drops

January 07, 2009

Brazilian stocks fell, halting the longest winning streak in almost a year, on concern demand for metals and oil will wane after analysts said manufacturing may slump further and a commodity rally won’t be sustained.

Cia. Siderurgica Nacional SA led a drop in steelmakers after Itau Corretora said manufacturing will have “weakness” through the first half of the year. Cia. Vale do Rio Doce, the world’s biggest iron ore miner, dropped 3.8 percent as metals prices sank. Petroleo Brasileiro SA (PETR4) fell for the first time in seven days on a newspaper report that the state-controlled oil company is seeking as much as $15 billion in loans.

“At this point I’m not too comfortable with a rally,” said Fernando Aldabalde, whose GS Allocation Dinamico FI Multimercado hedge fund in Rio gained 15 percent last year, beating 97 percent of its peers. “Equities may not be the best place to be if we are looking at low growth for years ahead. It makes you wonder if these gains are just short-term.”

The Bovespa (IBOV) slumped 1,543.18, or 3.7 percent, to 40,769.10 at 10:40 a.m. New York time, paring this year’s gain to 8.6 percent. The index had climbed 16 percent over the past six days in the longest winning streak since February 2008. Chile’s Ipsa slipped 1.1 percent. Mexico’s Bolsa dropped 2.5 percent.

CSN, as the Brazil’s third-biggest steelmaker is known, fell 4.5 percent to 34.96 reais. Fator Corretora chief strategist Lika Takahashi reiterated a “hold” rating on Brazil’s three biggest steelmakers after the country reported falling vehicle sales and a drop in industrial production.

‘Noisy Disembark’

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- largest steelmaker, lost 3.3 percent to 30.15 reais. Industrial output plunged in November by the most in seven years.

“If you haven’t done so yet, it’s about time you believe your eyes: the global recession made a noisy disembark in Brazil in the last quarter of 2008,” wrote Itau’s Guilherme da Nobrega in a report sent to clients.

Petrobras (PJX), as the oil company is known, fell 4.2 percent 24.38 reais, the biggest intraday drop in two weeks. Estado de S. Paulo said the Rio de Janeiro-based company asked several Brazilian banks each for between $1 billion and $3 billion in loans. Petrobras denied the report, saying its cash position is “healthy,” according to an e-mailed response to questions from the company’s press office.

Vale, which gained 21 percent this year before today, fell 1.10 reais to 27.85 reais. The Bloomberg Base Metals 3-Month Price Commodity Index declined 3.5 percent to 119.97.

The BM&FBovespa MidLarge Cap index dropped 3.4 percent, while the Small Cap index fell 1.7 percent.

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

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net


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