Bloomberg News

Bovespa Snaps Three-Day Rally on Europe Sovereign Debt Concern

November 09, 2011

Nov. 8 (Bloomberg) -- The Bovespa stock index fell for the first day in four on speculation Europe’s debt crisis may worsen even after Italian Prime Minister Silvio Berlusconi agreed to resign.

MMX Mineracao & Metalicos SA plunged after reporting its first quarterly loss in a year. HRT Participacoes em Petroleo SA dropped after saying one of its wells in Brazil’s Solimoes Basin may not contain oil.

The Bovespa slid 0.3 percent to 59,026.13 at the close of trading. Thirty-nine stocks fell on the index, while 27 gained. The gauge earlier fell as much as 1.2 percent, then pared losses after Italy’s president said Berlusconi will quit. The real strengthened 0.9 percent to 1.7326 per U.S. dollar.

“It’s not like Berlusconi was someone who opposed the fiscal reforms Italy needs, it’s just that his government was getting too weak,” Rodolfo Amstalden, an analyst at Empiricus Research, a Sao Paulo-based equity consulting firm, said in a telephone interview. “Nobody knows if he will be replaced by someone who can actually form a strong cabinet.”

Berlusconi agreed to step down after the parliament approves the country’s austerity plans, Napolitano said in an e- mailed statement after talks with the prime minister. The statement didn’t say when the vote, which was tentatively slated for next week, will take place.

Berlusconi won a vote earlier today in parliament on last year’s budget report without mustering an absolute majority. He won 308 votes in the 630-seat Chamber of Deputies, Speaker Gianfranco Fini said in Rome.

MMX Drops

MMX tumbled 3.8 percent to 7.17 reais. The mining company controlled by billionaire Eike Batista posted a net loss of 243.2 million reais ($140.4 million), compared with net income of 88.5 million reais a year earlier, according to a regulatory filing. Earnings were “weak,” Banco BTG Pactual SA analysts Edmo Chagas and Antonio Heluany wrote in a note to clients.

HRT slumped 17 percent to 750 reais. The company said in a regulatory filing it didn’t find clear signs of oil in its well 1-HRT-2-AM, located in SOL-T-169 block.

The Bovespa entered a bull market in October after gaining 22 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.

Brazil’s benchmark equity gauge trades at 10.4 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 5.42 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares to a daily average this year of 6.57 billion reais through Nov. 4, according to data from the exchange.

--Editors: Richard Richtmyer, 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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