Brazilian stocks dropped the most in a week as Petroleo Brasileiro SA tumbled and concern increased that China’s plans to cut energy usage and boost property curbs will slow demand for metal exports.
Petrobras, which gained more than 10 percent in the past five days, sank the most in seven months after crude dropped yesterday and on concern that a $78 billion share offering will dilute earnings. Vale SA, the world’s biggest iron ore producer whose biggest export market is China, dropped 1.9 percent.
“Today Petrobras is correcting the gains from last week and the oil drop from yesterday,” said Fabio Spinola, who helps oversee $1 billion as equity strategist at Sao Paulo-based Quest Investimentos Ltda., the hedge fund run by former Communications Minister Luiz Carlos Mendonca de Barros. “Then there’s concern China will cut steel production because it’s trying to slow its energy usage and that would affect iron ore demand.”
The Bovespa fell 0.5 percent to 66,407.28, the biggest drop since Aug. 30. Thirty-six stocks declined, while 30 rose. Brazilian markets were closed yesterday for a holiday. The BM&FBovespa Small Cap index was little changed at 1,286.38. The real was little changed at 1.7260 per dollar.
The MSCI Emerging Markets index fell 0.6 percent yesterday and crude slid 0.7 percent in New York.
China faces a “very arduous” task in cutting energy consumption over the remaining five months of the year to meet an efficiency target, Xin Guobin, the head of an industry ministry bureau, said at a briefing in Beijing on Sept. 6. That added to investor concern following yesterday’s reports that euro region banks held more risky bonds than indicated by stress tests.
Petrobras slid 4.3 percent to 27.83 reais, the biggest drop since Feb. 4. The Brazilian state-controlled oil producer plans on raising $78 billion in capital to help finance $224 billion in investments through 2014. The share offering includes $42.5 billion in stock that Petrobras will use to pay the government for 5 billion barrels of undeveloped oil reserves.
“It’s a very large offer, a lot of supply,” said Rogerio Freitas, a fund manager at Teorica Investimentos in Rio de Janeiro. “This will continue pressuring the stock for a long time.”
Vale fell to 41.71 reais.
Empresa Brasileira de Aeronautica SA, the world’s fourth- largest plane builder, gained the most in a week as concern eased that a jet crash in China last month will hurt the company’s safety record.
Embraer, as the company is known, advanced 2.8 percent to 11.55 reais.
An E-190 jet crashed in China on Aug. 24, killing at least 42 people, according to the official Xinhua News Agency. China’s aviation regulator, responding to speculation that the pilot was inadequately trained, said cases of pilots falsifying their qualifications and flying records date back to 2008. While the regulator said the cases were resolved, Embraer may be rallying on speculation the crash resulted from training rather than construction issues, said Kelly Trentin of Spinelli Corretora.
“It diminishes the possibility the company will be hurt by a lack of confidence in the safety of its jets,” said Trentin, head analyst at the Sao Paulo-based brokerage.