Bloomberg News

Bovespa Falls Most in Three Weeks on Europe, Brazil Inflation

December 09, 2011

Dec. 8 (Bloomberg) -- The Bovespa index fell the most in three weeks as concern policy makers will be unable to solve Europe’s debt crisis sent global stocks and commodities lower while a report showed faster-than-forecast inflation in Brazil.

Miner Vale SA and state-controlled oil producer Petroleo Brasileiro SA, the index’s heaviest-weighted companies, slumped as crude and copper prices reversed earlier gains. Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s second- biggest homebuilder by revenue, paced declines for companies that depend on domestic demand as traders drove up yields on interest-rate futures contracts.

The Bovespa fell 2.1 percent, the most since Nov. 17, to 57,455.02 at the close in Sao Paulo. Fifty-two stocks dropped on the index while 12 rose. The real lost 1.4 percent to 1.8243 per U.S. dollar.

“The market’s attentions are most focused on Europe,” said Joao Pedro Brugger, who helps oversee 80 million reais ($44.5 million) at Leme Investimentos in Florianopolis, Brazil. Referring to Brazilian inflation, he said, “the fact that it came in a bit firmer confirms there are still pressures.”

Commodities and global stocks as the European Central Bank damped speculation it would boost sovereign-debt purchases and regulators said the region’s lenders need to raise more capital than previously estimated. The Standard & Poor’s GSCI index of 24 raw materials dropped 1.2 percent.

Brazilian consumer prices rose faster than forecast in November, cementing expectations the central bank won’t accelerate the pace of interest-rate cuts. Inflation, as measured by the benchmark IPCA index, quickened to 0.52 percent last month from 0.43 percent in October. The increase was more than the 0.5 percent median estimate from 54 economists surveyed by Bloomberg.

Inflation Outlook

Inflation will slow to “around” its 4.5 percent target next year as the global crisis damps domestic activity and commodities prices, policy makers said in the minutes of their last meeting, published today. The central bank has cut the benchmark Selic by half a percentage point three times since August.

Vale, the largest iron-ore producer in the world, slid 1.4 percent to 38.50 reais while Petrobras tumbled 3.3 percent to 22.52 reais. Cyrela declined 5 percent to 15.06 reais.

The Bovespa entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as Brazil’s interest- rate cuts and speculation Europe was working toward solving its debt crisis buoyed demand for equities. The gauge is still down 17 percent this year on concern flagging global commodity demand and quickening inflation will hurt corporate earnings growth.

Brazil’s benchmark equity index trades at 10.4 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.27 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.52 billion reais through Dec. 1, according to data from the exchange.

--Editors: Brendan Walsh, 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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