Bovespa Index Falls for Third Day, Led by JBS, as Commodity Prices Tumble
Brazil’s Bovespa stock index fell for a third day as commodity prices dropped on concern the global economic recovery is faltering.
JBS SA, the world’s largest beef producer, led declines on the Bovespa index after saying it may consider buying out its partner in the Inalca JBS joint venture to solve a dispute over corporate governance. Vale SA, the world’s biggest iron ore producer, retreated for a third day as metals prices dropped and investors speculated it may make a bid for Potash Corp. of Saskatchewan Inc.
“The outlook is still lukewarm for the short term,” said Julio Martins, a partner at Adinvest Consultoria, a Rio de Janeiro-based equity advisory firm. “There’s a lot of concern abroad.”
Brazil’s Bovespa stock index fell 1 percent to 65,981.86. Five stocks fell on the index for every one that rose. The real lost 0.8 percent to 1.7701 per dollar, from 1.7562 on Aug. 20.
Stocks around the world dropped last week as a jump in U.S. jobless claims and an unexpected contraction in Philadelphia- area manufacturing bolstered concern the economic recovery is stalling.
JBS sank 4.2 percent to 7.28 reais. JBS may also consider selling its 50 percent stake in the Italian venture to partner Cremonini SpA or dividing the assets, JBS said today in a regulatory filing to Brazil’s securities regulator.
Vale slid 2.4 percent to 42.30 reais. Potash Corp. of Saskatchewan Inc., the fertilizer producer seeking to fend off a hostile takeover bid from BHP Billiton Ltd., said it began talks with other companies on alternatives to the $39 billion offer.
‘Third Parties’
“Discussions are being pursued with several of these third parties in order to generate value-enhancing alternatives,” Potash Corp. said today in a statement. China’s Sinochem Group and Brazil’s Vale SA made initial inquiries with Potash Corp.’s board late last week about the possibility of holding talks, a person with knowledge of the matter said, declining to be identified because the information isn’t public.
Vale said speculation that it has made an offer or is in talks to buy a fertilizer producer are “totally unfounded,” according to a regulatory filing today.
Brazil’s policy makers will keep the overnight interest rate unchanged at 10.75 percent through December, before resuming increases in January, according to the median estimate of about 100 analysts in an Aug. 20 central bank survey published today. Economists expected the central bank to raise the Selic rate to 11 percent by year-end a week earlier.
Cut Spending
Brazilian presidential candidate Dilma Rousseff may cut spending and reduce the government’s inflation target in 2012 to 4 percent from its current 4.5 percent if elected in October, Folha de S.Paulo reported, without saying where it obtained the information.
Rousseff has been discussing new austerity measures with President Luiz Inacio Lula da Silva, who agrees with the need for lower spending, Folha said.
The Bovespa index trades for 12.6 times analysts’ 2010 earnings estimates, compared with 12 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 16.5 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 14.7 times the reported profits of its companies after fetching 25.5 times in November, the most in almost six years, weekly data show.
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
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