The Bovespa index dropped the most in three weeks as concern about China’s economic recovery and Europe’s debt crisis pushed metals lower, dimming the outlook for Brazilian raw-material producers.
Vale SA (VALE3), the world’s largest iron-ore producer and whose top export market is China, contributed the most to the index’s decline as metals slid. Clothing retailer Cia. Hering sank the most in almost four months after reporting third-quarter net income that missed analysts’ estimates.
The Bovespa lost 1.4 percent to 58,922.04 at the close of trading in Sao Paulo, its biggest one-day drop since Sept. 28. The index declined 0.4 percent for the week. Fifty stocks sank on the gauge today while 17 rose. The real was little changed at 2.0276 per dollar. The Bloomberg Base Metals 3-Month Price Commodity Index tumbled 2.2 percent.
“For companies that depend more on exports, things are still complicated as problems in Europe persist and China struggles to show a substantial improvement in terms of economic activity,” Marcello Paixao, a portfolio manager at Principia Asset Management, said by phone from Sao Paulo.
China’s foreign direct investment fell 6.8 percent in September from a year earlier, the Ministry of Commerce said today in Beijing. It was the 10th decline in 11 months. China is Brazil’s biggest trading partner.
Vale lost 1.7 percent to 35.53 reais. Gerdau SA, Latin America’s biggest steel producer, slipped 4.4 percent to 18 reais, the steepest one-day drop since May.
Hering slumped 5 percent to 44.11 reais. Stocks declined in Europe after French President Francois Hollande said additional assistance for Spain wasn’t discussed by European leaders meeting at a summit in Brussels.
While the external outlook weakens Brazilian equities, signs that the central bank will keep the target lending rate known as the Selic near a record low for a long time may help to support stocks, Rodolfo Amstalden, an analyst at equity consulting firm Empiricus Research in Sao Paulo, said in a telephone interview.
“Looks like inflation will remain within a range that the central bank sees as acceptable, which supports our view that the Selic rate will remain near the current level for quite a while,” Amstalden said.
A measure of prices that is 60 percent weighted in wholesale was lower than economists expected. The IGP-M index rose 0.15 percent from Sept. 21 to Oct. 10, the Getulio Vargas Foundation reported today. The median forecast of 21 economists surveyed by Bloomberg was for a 0.34 percent increase.
Consumer prices as measured by the IPCA-15 price index increased 0.65 percent in the month through mid-October after a prior 0.48 percent gain, the national statistics agency said. The reading exceeded the median forecast of 0.59 percent in a Bloomberg survey of 44 economists.
The Bovespa (IBOV) has climbed 12 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted stock demand. The index trades at 15.2 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.6 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 6.11 billion reais ($3.01 billion) in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.33 billion reais this year through Oct. 17, according to data compiled by the exchange.
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