Bloomberg News

Bovespa Falls Most in a Week on Europe Concern, Commodities Drop

January 16, 2012

Jan. 13 (Bloomberg) -- The Bovespa index fell the most in a week as mining companies Vale SA and MMX Mineracao & Metalicos SA followed metals lower amid concern Europe’s debt crisis will worsen following reports of imminent downgrades by Standard & Poor’s.

Steelmaker Cia. Siderurgica Nacional SA declined after saying it may declare force majeure on iron ore shipments after record rainfalls curbed production at mines in southeastern Brazil. Klabin SA, Latin America’s biggest paper maker, retreated from a record high after it was cut to “market perform” from “outperform” at Itau Corretora de Valores SA.

The Bovespa sank 1.3 percent to 59,146.58 at the close of trading in Sao Paulo. Fifty-four stocks tumbled on the index, while 11 gained. Brazil’s benchmark equity gauge rose 0.9 percent this week. The real weakened 0.4 percent to 1.7863 per U.S. dollar. The Bloomberg Base Metals 3-Month Price Commodity Index fell 0.6 percent.

“Speculation that Standard & Poor’s is about to downgrade several European countries is making everyone more cautious,” Renato Bandeira de Mello, head of equity trading at Futura Corretora, said by phone from Sao Paulo. “I’m not seeing any good reason to be buying right now. Europe’s fiscal problems will weigh on the market for quite some time.”

France was stripped of its top credit rating by S&P and banks suspended talks with Greece over debt restructuring, the first blows this year to efforts aimed at stemming Europe’s fiscal turmoil. Slovakia, Italy and Austria are among other countries to be downgraded, European officials said.

Vale, MMX

Vale, the world’s largest iron-ore producer, slid 1 percent to 38.95 reais. MMX tumbled 2.6 percent to 6.77 reais. CSN, as Cia. Siderurgica is known, fell 0.8 percent to 16.37 reais.

“Metal prices should keep falling, as the global economy slows and demand weakens,” Gustavo Mendonca, who helps oversee 250 million reais ($140 million) as an economist at Oren Investimentos, said by phone from Rio de Janeiro.

Klabin sank 2.6 percent to 7.95 reais.

Tele Norte Leste Participacoes SA sank 2.3 percent to 16.86 reais as Brazilian telecom companies tumbled after Banco BTG Pactual SA cut its recommendation, saying industry earnings may be hurt by increased competition.

The Bovespa has advanced 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 gauge trades at 9.4 times analysts’ earnings estimates, which compares with the ratio of 9.6 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show. Brazil’s benchmark equity gauge sank 18 percent in 2011.

Traders moved 6.57 billion reais 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, Glenn J. Kalinoski

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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