Bloomberg News

Bovespa Falls as Brazil Growth Forecasts Cut Amid Europe Crisis

November 01, 2011

Oct. 31 (Bloomberg) -- The Bovespa stock index fell for the first session in four, paring a monthly gain, as economists cut Brazil’s growth forecasts and persistent concern about Europe’s debt crisis sent commodity producers lower.

Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, joined a rout for companies that depend on domestic demand after Morgan Stanley cut its recommendation. Vale SA, the world’s largest iron-ore producer, dropped the most in more than a week as metals prices slumped. Beef producer Marfrig Alimentos SA tumbled after Moody’s Investors Service changed its debt- rating outlook to negative.

The Bovespa lost 2 percent to 58,338.39 at the close of trading in Sao Paulo. The index is up 11 percent since Sept. 30, its first monthly gain since March. Fifty-four stocks fell on the gauge today while 13 rose. The real weakened 2.6 percent to 1.7157 per dollar.

“The government and analysts expect that the crisis in Europe, as well as slow growth and high unemployment in the U.S., will be reflected in a decline in consumption in Brazil,” said Leandro Martins, head analyst at Sao Paulo-based brokerage Walpires SA. “China is also showing deceleration.”

Economists covering Brazil cut their forecasts for gross domestic product expansion in 2012 for a third straight week. GDP will grow 3.5 percent next year, according to the median forecast in an Oct. 28 central bank survey of about 100 economists published today, down from a forecast of 3.51 percent the previous week.

Stocks tumbled worldwide amid concern European leaders will struggle to raise funds to contain the region’s debt crisis. The Standard & Poor’s GSCI index of 24 raw materials dropped 0.7 percent.

Renner, Vale

Renner lost 1.4 percent to 52.06 reais, adding to its Oct. 28 plunge of 7.5 percent after third-quarter results trailed forecasts. Morgan Stanley lowered its recommendation on the stock to “equal weight” from “overweight.”

Vale declined 2.1 percent to 40.80 reais as the Bloomberg Base Metals 3-Month Price Commodity Index dropped 1.4 percent.

Marfrig, Latin America’s second-largest beef producer, may have its debt ranking cut at Moody’s as margins are squeezed by high raw-material prices, the slowing global economy and a decline in the Brazilian currency. The rating firm changed its outlook on the company’s B1 rating to negative from stable, affecting $1.625 billion of notes. Marfrig dropped 4.5 percent to 7.45 reais.

Economists cut their forecasts for Brazil’s inflation in 2012 for a second week, providing support for the central bank as it makes the case for more interest-rate cuts and driving down yields on rate futures. Consumer prices will increase 5.59 percent next year, the survey showed, down from a forecast of 5.60 percent the previous week.

Bull Market

Brazil’s benchmark equity index rose Oct. 28, posting the biggest weekly advance in more than two years, as BRF Brasil Foods SA and Cia. Hering reached record highs after third- quarter profits topped analysts’ estimates.

The Bovespa entered a bull market last week after gaining more than 20 percent from a two-year low on Aug. 8 as cheap valuations and declining interest rates lured investors amid improving prospects for a solution to Europe’s debt crisis. The measure trades at 10.7 times analysts’ earnings estimates, compared to a ratio of 10.5 for MSCI Inc.’s gauge of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.2 billion reais ($3.6 billion) in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares to a daily average this year of 6.56 billion reais through Oct. 26, according to data from the exchange.

--Editors: Richard Richtmyer, Marie-France Han

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

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


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