Bloomberg News

Bovespa Index Falls on Retail Sales, Global Economy Concern

June 10, 2011

June 10 (Bloomberg) -- The Bovespa stock index fell, sending the benchmark to its largest weekly decline in a month, as commodities dropped and Brazil’s retail sales unexpectedly retreated in April, adding to signs that the global economy is slowing.

Braskem SA, Latin America’s largest petrochemicals maker, fell the most in six weeks as crude prices tumbled. Vale SA, the world’s second-largest miner, retreated as metals prices dropped. Brazil’s largest online retailer, B2W Cia. Global do Varejo, dropped after Brazil’s Justice Ministry requested information on delays in product deliveries from Americanas.com, the company’s online retailer.

The Bovespa slipped 1.2 percent to 62,697.16 at 4 p.m. New York time. The index fell 2.5 percent for the week, its largest decline since the five days ended June 3. Fifty-nine stocks declined while six rose. The real weakened 0.9 percent to 1.5973 per U.S. dollar, from 1.5832 yesterday.

“The market is clearly pricing in a rhythm of slower economic activity,” said Jaime Valdivia, who helps manage about $1.4 billion of emerging-market assets at Bluecrest Capital Management in New York. “We’re going through a soft patch of global economic activity, in the U.S., Europe and China, and soft retail sales in Brazil aren’t a big surprise.”

April’s contraction in retail sales surprised 26 of 30 economists surveyed by Bloomberg, whose median estimate was for 0.4 percent growth in April. Sales rose 10 percent from the prior year, the agency said.

PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder, fell 2.5 percent to 9.48 reais. Brookfield Incorporacoes SA dropped 3.2 percent to 8.30 reais.

B2W, Marfrig

B2W fell 2.7 percent to 21.50 reais after earlier dropping as much as 3.9 percent. Marfrig Alimentos SA, Latin America’s second-largest beef producer, lost 1.4 percent to 13.95 reais.

Gol Linhas Aereas Inteligentes SA, Brazil’s biggest airline by market value, retreated 1.3 percent to 18.85 reais while Tam SA, Brazil’s second-biggest airline, dropped 2.8 percent to 32.16 reais.

Crude oil for July delivery fell 3 percent to $98.85 a barrel. The UBS Bloomberg CMCI Index of 26 raw materials slid 0.7 percent.

Braskem fell 3.3 percent, the most since May 2, to 23.37 reais. Vale dropped 0.9 percent to 44.06 reais.

After gaining speed in the first quarter, when gross domestic product expanded 1.3 percent from the previous three- month period, Brazil’s economy has shown signs of slowing.

Industrial Production

Industrial production slumped 2.1 percent in April from March, the biggest contraction since 2008, and consumer confidence fell in May to its lowest level in more than a year. Average real wages fell 1.8 percent in April from March.

“The economy isn’t turning south, but rather it’s an adjustment to government monetary measures and a sharp correction globally for growth,” Valdivia said.

U.S. stocks extended a sixth weekly drop today, the longest slump for the Dow Jones Industrial Average since 2002, amid concern the global economy is slowing. China reported a smaller- than-estimated trade surplus today as export growth dimmed, while U.K. manufacturing slowed more than economists forecast.

The Bovespa has fallen 14 percent from a November high on concern accelerating inflation will hurt economic growth. The index trades at 10 times analysts’ earnings estimates, near 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 14.8 for India’s Sensex.

Investors poured 2.9 billion reais ($1.8 billion) into Latin America’s biggest equity market in May, after pulling 4.07 billion reais in the preceding three months, data from the Sao Paulo exchange show.

--With assistance from Alexandre Ragir in Rio de Janeiro. Editors: Richard Richtmyer, Brendan Walsh

To contact the reporters on this story: Leon Lazaroff in New York llazaroff@bloomberg.net; Fabiola Moura in New York at fdemoura@bloomberg.net

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


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