Bloomberg News

Bovespa Tumbles Most in Six Weeks on Europe, Brazil Slowdown

November 18, 2011

Nov. 17 (Bloomberg) -- The Bovespa stock index fell the most in six weeks after concern heightened that Europe’s debt crisis will derail the global recovery and a report showed Brazil’s economy grew at the slowest pace in two years.

Oil producer Petroleo Brasileiro SA and miner Vale SA, the index’s heaviest-weighted companies, followed crude and metals prices lower. Homebuilder Gafisa SA posted the biggest three-day plunge since November 2008. Banco Santander Brasil SA led a rout for banks after an analyst at Itau Unibanco Holding SA said its parent may sell $1 billion of the unit’s shares.

The Bovespa lost 2.7 percent to 56,988.90 at the close in Sao Paulo, the most since Oct. 3. Sixty-three stocks dropped on the index while five gained. The real weakened 0.5 percent to 1.7795 per dollar.

“Europe’s debt problems continue to be the focus,” said Augusto Lange, who helps manage 1.4 billion reais ($785 million) at Neo Gestao de Recursos in Sao Paulo. “That’s what’s affecting the market today.”

The Bovespa tracked U.S. stocks and commodities lower as concern grew that Europe’s debt crisis will worsen and lawmakers will fail to agree on plans to cut the American deficit. Reuters reported a euro-area official as saying there are no aid plans for Italy from the European Financial Stability Facility. Republicans and Democrats on Congress’s supercommittee hardened their positions with less than a week until the deadline to propose a plan to cut the deficit.

Commodities Decline

Crude futures slid 3.7 percent while the Bloomberg Base Metals 3-Month Price Commodity Index declined 3.1 percent.

Brazil’s economy grew at its slowest pace in two years in September, the central bank said in a report today. Economic activity, a proxy for gross domestic product, expanded 1.17 percent from the same month last year, falling short of the median forecast of 1.25 percent from 14 analysts surveyed by Bloomberg.

“All in all, this has been a somewhat negative earnings season,” Carlos Firetti, an analyst at Banco Bradesco SA, said in a note to clients today, referring to third-quarter results in Brazil. The drop in profits was “mainly” due to the plunge in the real fueled by Europe’s debt crisis, he said.

Of the Bovespa companies that Bradesco covers, 39 percent reported third quarter earnings that trailed forecasts, while 32 percent exceeded estimates and 29 percent were in line, according to Firetti’s report.

Vale, Petrobras, Gafisa

Vale declined 2.2 percent to 41.35 reais while Petrobras slipped 2.7 percent to 21.52 reais. Gafisa lost 7 percent to 5.21 reais, for a three-day decline of 17 percent.

Santander Brasil slid 4.6 percent to 13.60 reais. Its parent, Madrid-based Banco Santander SA, may sell 121 million American depositary receipts, or 3.2 percent of the Brazilian business, Itau analyst Regina Longo Sanchez said in a note, citing unidentified Santander management. The Madrid-based bank filed a prospectus yesterday, saying the unit’s controlling shareholders could sell as many as 310.8 million ADRs.

Redecard SA, Brazil’s second-biggest card-payment processor, dropped 3.4 percent to 29.75 reais. The company plans to defend its market share by cutting costs to reduce prices, Carlos Zanvettor, executive director of retail and marketing, said yesterday in an interview in London. Redecard expects to lower its cost per transaction to 30 centavos to 35 centavos in the next two months from 38 centavos in the first quarter, as it eliminates jobs and reduces spending on logistics, Zanvettor said.

Brazil’s benchmark equity gauge rose yesterday as crude prices jumped and traders added to wagers for lower Brazilian interest rates.

The Bovespa trades at about 10.5 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s gauge of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.94 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.53 billion reais through Nov. 14, 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 at papadopoulos@bloomberg.net


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