Bloomberg News

Bovespa Declines as Global Growth Concern Pushes Usiminas Lower

December 06, 2012

The Bovespa (IBOV) index dropped as Usinas Siderurgicas de Minas Gerais SA (USIM5) led Brazilian raw-material producers lower after data showing the euro area fell into a recession added to concern the global expansion is faltering.

Meatpacker Marfrig Alimentos SA dropped to a 19-week low. Embraer SA slid after Delta Air Lines Inc. agreed to buy jets from Bombardier Inc. Homebuilder PDG Realty SA Empreendimentos & Participacoes rallied amid speculation Brazil will resume cutting interest rates to shore up economic growth.

The Bovespa index fell less than 0.1 percent to 57,656.42 at the close of trading in Sao Paulo after earlier declining as much as 1 percent. Thirty-four stocks dropped on the measure while 33 advanced. Trading volume for the gauge’s members was 17 percent lower than the average over the past five days, data compiled by Bloomberg show.

“Nobody is really willing to buy as you see news such as Europe falling into a recession,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “With the global economy giving signs that the slowdown is deepening, things get particularly worse for companies that depend more heavily on exports, such as raw-material producers.”

The Standard & Poor’s GSCI index of 24 raw materials lost 1.2 percent as the European Union’s statistics office reported that gross domestic product for the 17 euro nations shrank 0.1 percent in the third quarter from the previous three months, when it fell 0.2 percent. European Central Bank President Mario Draghi said today that the bank now forecasts the region’s economy will contract 0.5 percent this year, exceeding the 0.4 percent decline that the bank projected in September.

Usiminas, MMX

Usiminas, as the steelmaker Usinas Siderurgicas is known, dropped 3.1 percent to 11.89 reais, the lowest since Nov. 27. MMX Mineracao & Metalicos SA, the mining company controlled by billionaire Eike Batista, sank 1.9 percent to 3.68 reais. Marfrig fell 2.9 percent to 8.46 reais.

PDG Realty gained 3.9 percent to 3.17 reais while Gafisa SA, a competitor, advanced 3.2 percent to 4.58 reais as Itau Unibanco Holding SA said it expects the central bank to reduce the target lending rate by one percentage point to 6.25 percent in 2013. Brazilian swap rates on the contract due in January 2014 plunged 23 basis points, or 0.23 percentage point, to 6.87 percent.

“In a scenario of weak economic activity, we believe that the government will opt for lower interest rates and a weaker exchange rate to stimulate growth,” Itau’s economists including Ilan Goldfajn said in a research note.

Stimulus Measures

Finance Minister Guido Mantega announced this week tax cuts for the real estate industry and lower rates for loans given by the state development bank to revive growth in Latin America’s largest economy. The national statistics agency reported last week that third-quarter growth was half the pace that economists surveyed by Bloomberg forecast.

The real strengthened 0.5 percent to 2.0774 per U.S. dollar. Brazil reduced yesterday the maturity of foreign loans subject to a 6 percent tax to one year from two years to support growth. It also announced earlier this week it would exempt exporters from the same level of tax on some borrowing.

Embraer declined 3.3 percent to 13.10 reais. Delta said today it placed an order to buy 40 regional jets from Bombardier Inc. An additional option for 30 more aircraft may boost the value of the order to $3.29 billion.

Delta was in talks to buy the jets from both Bombardier and Embraer, Chief Executive Officer Richard Anderson said on an October earnings conference call.

The Bovespa has climbed 9.9 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 demand for equities. The index trades at 10.7 times analysts’ earnings estimates for the next four quarters, compared with 10.9 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

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 at papadopoulos@bloomberg.net


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