The Bovespa index dropped for a third day on renewed concern that a worsening crisis in Europe will curb demand for Brazilian equities after Moody’s Investors Service cut the outlook on Germany’s credit rating.
Vale SA (VALE3), the world’s largest iron-ore producer, followed metals lower, contributing the most to the Bovespa’s drop. The MSCI Brazil/Materials index tumbled the most among 10 industry groups. Itau Unibanco Holding SA (ITUB4), Latin America’s biggest bank by market value, climbed after saying its second-quarter net income rose 8.1 percent to 3.56 billion reais ($1.74 billion).
Brazil’s benchmark stock measure lost 0.7 percent to 52,638.63 at the close in Sao Paulo. Forty-seven stocks dropped on the index while 19 gained. The real weakened 0.3 percent to 2.0445 per U.S. dollar at 5:29 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials declined 0.5 percent. Commodities producers account for 42 percent of the Bovespa (IBOV)’s weighting.
“There are no signs that things in Europe will improve in the short term, and with increasing risk aversion in the global markets, equities should keep performing poorly,” Clodoir Vieira, an economist at Sao Paulo-based brokerage Souza Barros Corretora, said by phone.
Commodities fell as Germany, the Netherlands and Luxembourg had the outlooks for their Aaa credit ratings lowered to negative by Moody’s late yesterday. The risk that Greece will leave the 17-nation euro currency and increasing likelihood of collective support for European countries such as Spain and Italy were among the reasons for the change, Moody’s said.
Vale slid 4.7 percent to 35.15 reais.
The Bovespa earlier gained as much as 0.7 percent after a report showed manufacturing may contract at a slower pace in China, Brazil’s biggest trading partner, and as Itau rallied after saying in a regulatory filing its portfolio of loans reached 413.4 billion reais, up 15 percent from a year earlier.
“China’s manufacturing numbers signaled that at least things are not getting worse,” Luis Gustavo Pereira, an analyst at Futura Corretora, said by phone from Sao Paulo. “Investors reacted well to Itau’s earnings, which helped to lift the stock.”
Itau added 3.4 percent to 30.19 reais.
JSL SA (JSLG3) gained 2.1 percent to 9.65 reais. The transportation company said in a filing it signed a 350 million-real contract to handle logistics operations for bus maker MAN SE’s plant in Rio de Janeiro for five years.
Pao de Acucar Earnings
Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, tumbled 1.9 percent to 77.20 reais as concern mounted that increased competition is eroding profits at its electronics subsidiary.
Pao de Acucar’s second-quarter net income rose to 255 million reais from 91 million reais a year earlier, according to a regulatory filing yesterday. While that exceeded the average estimate of 143.5 million reais among six analysts surveyed by Bloomberg, combined earnings at electronics subsidiaries Via Varejo and Nova Pontocom slid 3.5 percent to 214 million reais, the company said.
The Bovespa has dropped 23 percent from this year’s high on March 13 as the debt crisis in Europe worsened and growth in Brazil faltered. The index trades at 10 times analysts’ earnings estimates for the next four quarters, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 6.08 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.23 billion reais this year through July 23, according to data compiled by the exchange.
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