Bloomberg News

Bovespa Snaps Winning Streak as Factory Output Trails Forecast

January 06, 2012

Jan. 5 (Bloomberg) -- The Bovespa index dropped, snapping the longest rising streak in almost three months, after a report that showed manufacturing contracted the most in two years fueled concern the slowdown in Brazil’s economy is deepening.

The BM&FBovespa Real Estate Index fell the most in two weeks as Tecnisa SA tumbled after saying its fourth-quarter contracted sales fell 46 percent. Vale SA slid as metals declined on concern that Europe’s debt crisis will curb demand.

The Bovespa sank 1.4 percent to 58,546.08 at the close of trading in Sao Paulo. Fifty-five stocks dropped on the index, while 14 rose. The real fell 0.6 percent to 1.8432 per dollar.

Industrial output in Brazil dropped 2.5 percent in November from a year earlier, the national statistics agency said in Rio de Janeiro today. That was the biggest contraction since October 2009 and more than the median forecast of a 2.4 percent decline among 38 analysts surveyed by Bloomberg.

“The report shows that the Brazilian economy is still weak,” Luciano Rostagno, chief strategist at Banco West LB do Brasil SA, said by phone from Sao Paulo. “It helped to curb the optimism we saw in the market in the past few days.”

The Bovespa advanced in each of the past four sessions, the longest rising streak since Oct. 14, as lower inflation forecasts and higher commodity prices boosted Brazilian stocks.

Economic Indicators

Today’s manufacturing report was the latest signal pointing to a deepening slowdown in Latin America’s largest economy. Brazil’s gross domestic product contracted in the third quarter for the first time since 2009 as Europe’s debt crisis damped global growth. A report last month showed retail sales in October unexpectedly stalled. President Dilma Rousseff’s administration targets growth of 5 percent in 2012.

Tecnisa fell 2.4 percent to 10 reais. The BM&FBovespa Real Estate Index dropped 2.6 percent, its biggest one-day decline since Dec. 19.

Oil and industrial metals dropped as a report from the European Union’s statistics office showed that euro-zone industrial orders increased less than forecast by analysts, stoking concern the region’s debt crisis is threatening growth.

OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, sank 2.4 percent to 13.60 reais. Vale, the world’s largest iron-ore producer, dropped 2.5 percent to 39.76 reais.

Cielo, Redecard

Cielo SA, Brazil’s biggest card-payment processor by market value, tumbled 1.4 percent to 48 reais, and smaller rival Redecard SA declined 1.8 percent to 28.95 reais. Both were lowered to “neutral” from “outperform’ at Credit Suisse Group AG, which cited slower growth and more competition.

The Bovespa has gained 20 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 Bovespa trades at 10 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 5.67 billion reais ($3.08 billion) in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 6.49 billion reais in 2011, 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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