July 8 (Bloomberg) -- Brazil’s Bovespa index fell for a fifth day, the longest losing streak since December, as a plunge in oil and metal prices sparked a selloff in the nation’s biggest commodity producers.

Petroleo Brasileiro SA slid for a seventh day as Itau Unibanco Holding SA and Credit Suisse Group AG analysts predicted share declines after no oil was discovered in the offshore Guarani well. Banco do Brasil SA led declines for banks after it reduced its stake in Visa Inc.’s Brazil affiliate. Perdigao SA and Sadia SA fell at least 1 percent after Brazil’s antitrust agency said the merger of the country’s two biggest food companies likely won’t be approved this year.

“There’s growing uncertainty about the speed of the recovery,” said Roni Lacerda, who helps manage $1 billion at Rio de Janeiro-based Mercatto Gestao de Recursos. “This may bring opportunities but not necessarily in the index, not necessarily in mining and oil that are tied to the global economy.”

The Bovespa index lost 0.6 percent to 49,177.55. The gauge, which is made up of about half commodity producers, fell 9.7 percent since its June high as commodities dropped, led by energy, on signs the economic recovery is faltering. Brazilian markets will be closed tomorrow for a holiday.

Europe’s economy declined by a record in the first quarter, government data showed today. Leaders from the G-8 industrialized nations met today to discuss steps to revive shrinking economies and end rising unemployment.

Small Caps

The BM&FBovespa Small Cap index, which is made up of mostly utilities, retailers, homebuilders and food companies, is down only 1.6 percent from this year’s high on July 6. The index of companies smaller than $3.2 billion in market value rose 47 percent this year, while the Bovespa advanced 31 percent on speculation falling interest rates will bolster consumer demand.

Stocks that benefit from credit growth as interest rates fall will continue to be better bets than commodity producers, Lacerda said in a telephone interview.

Among other Latin American markets, Mexico’s Bolsa rose 0.5 percent, Chile’s Ipsa slipped 0.6 percent and the Lima General index dropped 2 percent.

Petrobras slid 0.8 percent to 29.11 reais.

Crude oil fell more than 4 percent today, extending the longest losing streak since December, after a government report showed a bigger-than-expected gain in U.S. fuel inventories as the recession curbed demand.

Exxon Mobil Corp. said yesterday no oil was found in the Guarani well on the subsea block known as BM-S-22. Exxon and Hess Corp. each own 40 percent stakes while Petrobras owns 20 percent of the prospect that is part of an offshore region that includes Tupi, the largest oil discovery in the Americas since Mexico’s Cantarell in 1976.

‘Fairly Valued’

Petrobras shares are “fairly valued” and the prospect of lower oil prices and the setback for the offshore Guarani well may lead to further share declines, Credit Suisse said. receipts declined 2.7 percent to $35.15.

“Expectations on the pre-salt are likely to deflate,” said Emerson Leite, a Sao Paulo-based analyst at Credit Suisse Group AG. “We are not suggesting the pre-salt play’s huge potential is questionable, but rather that risks do exist and that expectations on the overall story need to be moderated somewhat.”

Banco do Brasil slid 3.1 percent to 21 reais after it cut its stake in Cia. Brasileira de Meios de Pagamento to 23.53 percent from 31.63 percent initially.

Perdigao sank 3 percent to 38.80 reais. Sadia slumped 1.2 percent to 5.14 reais.

Merger

Cade, as the regulator is known, is unlikely to approve the merger of the companies this year, Paulo Furquim, the board member responsible for the case, said today in Brasilia. The regulator may allow Perdigao and Sadia to merge some operations before its final ruling, he said.

“The market may be seeing that the merger will take a while” to be approved, said Joao Pedro Brugger, an analyst at Leme Investimentos in Florianopolis, Brazil.

In Mexico, Grupo Aeroportuario del Pacifico SAB fell for the first time in three days, dropping 1.4 percent to 24.61 pesos. Mexico’s largest non-government airport operator yesterday said that June traffic fell 20 percent from a year earlier, paced by a 25 percent decline in international traffic.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

Last Updated: July 8, 2009 16:46 EDT