Bloomberg News

Bovespa Falls Most in Six Weeks as Petrobras Follows Oil Lower

December 28, 2011

Dec. 28 (Bloomberg) -- The Bovespa stock index fell the most in six weeks as Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA followed oil prices lower and global stocks declined on renewed concern about Europe’s debt crisis.

Phone company Tele Norte Leste Participacoes SA tumbled after it was cut to “market perform” from “outperform” at Bradesco Corretora. Gol Linhas Aereas Inteligentes SA and Tam SA sank after Brazil’s civil aviation authority said it plans to change rules for rights for take-off and landing in the nation’s busiest airports to stimulate competition and lower ticket prices.

The Bovespa fell 2.5 percent to 56,533.76 at the close of trading in Sao Paulo, the biggest drop since Nov. 17. Sixty-one stocks sank on the index, while six gained. The real weakened 0.7 percent to 1.8736 per U.S. dollar.

“The external outlook is still worrisome, problems in Europe are still there and nothing structural has changed,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by phone from Rio de Janeiro.

The euro weakened, commodities dropped and global stocks fell as the European Central Bank’s balance sheet surged to a record 2.73 trillion euros ($3.53 trillion) after it lent financial institutions more money last week, highlighting growing risks from the region’s debt crisis. Oil fell for the first time in seven days, and the Standard & Poor’s GSCI index of 24 raw materials slid 1.2 percent.

Petrobras, as state-run Petroleo Brasileiro is known, declined 3.5 percent to 21.43 reais and contributed the most to the Bovespa’s drop. OGX, the oil company controlled by billionaire Eike Batista, fell 1.7 percent to 13.76 reais.

Gol, Tam Tumble

Gol slumped 6.4 percent to 11.91 reais, and Tam tumbled 2.3 percent to 35.67 reais. Brazil’s civil aviation authority, known as Anac, wants to alter by the second half of 2012 how take-off and landing rights are distributed among airlines to stimulate competition and lower ticket prices, Marcelo Guaranys, the agency’s president, said in an interview.

Banco do Brasil SA, Latin America’s biggest bank by assets, slid 2.4 percent to 23.47 reais. The lender said Allan Simoes Toledo left the position of head of the wholesale business after a board decision, according to Marco Tulio Bretas de Vasconcelos, communication manager at the bank.

The Bovespa entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as interest-rate cuts in Brazil and signs of progress in solving Europe’s debt crisis buoyed demand for equities. The measure is still down 18 percent this year on concern flagging global commodity demand and quickening inflation will hurt corporate earnings growth.

The index trades at 10.2 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 3.58 billion reais ($1.91 billion) in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.51 billion reais through Dec. 27, according to data from the exchange.

--Editors: Richard Richtmyer, Marie-France Han

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 in New York at papadopoulos@bloomberg.net


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