Bloomberg News

Bovespa Falls Most in 6 Weeks on China, U.S. Manufacturing Data

June 01, 2011

June 1 (Bloomberg) -- The Bovespa stock index tumbled the most in six weeks after reports showed manufacturing cooled in the U.S. and China, Brazil’s biggest trading partners.

Vale SA, the world’s largest iron-ore producer whose top export market is China, fell. JBS SA, the world’s biggest beef producer, dropped after it was cut to “neutral” at HSBC Holdings Plc. Cia. Brasileira de Distribuicao Grupo Pao de Acucar posted its steepest two-day decline in four months as a dispute between its controllers spurred Raymond James & Associates Inc. to cut its rating.

The Bovespa index slid 1.9 percent to 63,411.48 at the close of Sao Paulo trading at 4:15 p.m. New York time, the most since Apr. 18. Ten stocks declined on the index for each that gained. The real weakened 0.9 percent to 1.5942 per U.S. dollar.

“Data from U.S. and China weren’t so good,” said Alvaro Bandeira, a director of Rio de Janeiro-based brokerage Ativa Corretora, in a telephone interview. “Markets around the world didn’t respond well to the data released today, and Brazilian stocks followed the negative trend.”

Manufacturing in the U.S. expanded in May at the slowest pace in more than a year. The Institute for Supply Management’s factory index fell to 53.5 last month from 60.4 in April, the Tempe, Arizona-based group said today. Economists projected the measure would drop to 57.1, according to the median forecast of 83 economists surveyed by Bloomberg.

Separately, a report from ADP Employer Services showed employment in the U.S. grew by 38,000 last month, the smallest increase since September, from a revised 177,000 in April. The median estimate compiled by Bloomberg called for a 175,000 advance for May.

China’s Manufacturing

China’s manufacturing expanded at the slowest pace in nine months in May as the government extended a campaign to cool inflation and the property market, a survey of companies indicated. The country’s Purchasing Managers’ Index was at 52 from 52.9 in April, China’s Federation of Logistics and Purchasing said in an e-mailed statement.

Vale fell 0.8 percent to 44.48 reais. JBS slumped 5.1 percent to 5.37 reais.

Pao de Acucar, Brazil’s biggest retailer, fell 1.4 percent to 62.30 reais, bringing the two-day decline to 5.8 percent as a dispute between its controllers spurred Raymond James & Associates Inc. to cut its rating to “outperform” from “strong buy.”

Casino Guichard-Perrachon SA said yesterday it filed for arbitration against the Diniz Group to make its partner meet the obligations of a November 2006 agreement governing control of Pao de Acucar. The statement, which didn’t elaborate, came after Casino learned that Pao de Acucar Chairman Abilio Diniz held talks with Carrefour SA on a possible deal, according to two people familiar with the matter, who asked not to be identified because the discussions are private.

‘Overweight’ Position

Credit Suisse Group AG suggested adding to an “overweight” position in Brazilian financial stocks while cutting holdings of utilities and phone operators as inflation will likely ease through August.

Utilities were lowered to “market weight” in Credit Suisse’s model portfolio of Brazilian stocks for June, while telecommunications remained “overweight,” according to a note to clients dated yesterday from analyst Andrew T. Campbell.

Investors poured 1.79 billion reais ($1.13 billion) into Latin America’s biggest equity market in the month through May 25, after pulling 4.07 billion reais from February through April, data from the Sao Paulo exchange show.

The Bovespa tumbled 13 percent from a November high through yesterday on concern accelerating inflation will hurt economic growth. The index trades at 10.3 times analysts’ earnings estimates, the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 12.5 for the Shanghai Composite Index, 6.7 for Russia’s Micex and 14.6 for India’s Sensex.

--Editors: Glenn Kalinoski, Brendan Walsh

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

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


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