Bovespa Index Declines as World Growth Concern Outweighs Brazil Inflation
The Bovespa index recorded its fifth weekly decline in six as global economic growth concerns overshadowed a report that showed Brazilian inflation fell more than forecast this month.
The index dropped 0.3 percent to 59,478.01 at 4:30 p.m. New York time after earlier rising as much as 0.7 percent. The equity gauge fell 3.3 percent this week. The real strengthened 0.3 percent to 1.5745 per U.S. dollar.
Gerdau SA (GGBR4), Latin America’s largest steelmaker, led decliners, dropping to its lowest price in more than two years. Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, dropped 2.3 percent, leading a retreat by companies that depend on domestic demand. BRF - Brasil Foods SA (BRFS3), the world’s largest poultry exporter, fell as its shares were cut to “market perform” from “outperform” at Itau BBA Securities.
“This report isn’t conclusive, it’s not really an indication that inflation is weakening,” Marcello Paixao, money manager at Sao Paulo-based quant fund Principia Capital Management, said in a telephone interview. “European countries still need to prop up the funds to buy sovereign-bonds, and to propose something to tackle the solvency problem. All of this is weighing on the markets.”
The IGP-10 inflation index from the Getulio Vargas Foundation in Rio de Janeiro showed a decline of 0.12 percent in July, compared to a median estimate of a 0.09 percent drop in a Bloomberg survey of 30 economists.
Stress Tests
The European Banking Authority said eight banks had a combined capital shortfall of 2.5 billion euros ($3.5 billion), far less than predicted by analysts and investors. The list included two Greek and five Spanish banks. A further 16 banks, including seven in Spain, barely passed the tests. All banks examined in Italy, Germany, France, the U.K. and Ireland passed.
U.S. stocks rose, trimming the Standard & Poor’s 500 Index’s weekly loss, as gains in energy and technology shares were enough to overcome concern that an impasse over raising the federal debt limit may put the nation’s top credit rating in jeopardy. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.8, the weakest reading since March 2009, from 71.5 the prior month. The gauge was projected to rise to 72.2, according to the median forecast of 62 economists surveyed by Bloomberg News.
Copper futures for September delivery rose 0.8 percent to $4.4140 a pound on the Comex in New York. Crude for August delivery advanced 1.6 percent to $97.24 a barrel on the New York Mercantile Exchange.
Gerdau slumped 3.2 percent to 14.62 reais, its lowest price since April 8, 2009, and Lojas Renner fell 2.3 percent to 56.50 reais. Brasil Foods, which jumped to its highest in two months yesterday after getting approval for its $3.8 billion Sadia SA acquisition, retreated 0.7 percent to 29.50 reais.
OGX
OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, fell 1.2 percent to 13.90 reais.
Brazil’s benchmark equity gauge has lost 19 percent since a November high on concern that rising inflation may hurt domestic demand as a slowdown in global economic growth could weaken commodities.
The Bovespa trades at 9.6 times analysts’ earnings estimates, the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 12.9 for the Shanghai Composite Index, 6.7 for Russia’s Micex and 15 times for India’s Bombay Stock Exchange Sensitive Index.
Traders moved 5.68 billion reais ($3.61 billion) in stocks today, data compiled by Bloomberg show. That compares to a daily average this year of 6.42 billion reais through July 6, according to data from the exchange.
To contact the reporter on this story: Leon Lazaroff in New York llazaroff@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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