Bovespa Stock Index Declines, Extends Longest Weekly Slump Since June

The Bovespa stock index posted a third weekly drop, the longest losing streak since June, on concern Europe’s debt crisis will slow global growth while fewer interest-rate cuts in Brazil may limit domestic demand.

State-controlled oil company Petroleo Brasileiro SA slumped after Bank of America Corp. cut its profit estimates. Miner MMX Mineracao & Metalicos SA paced a rout for raw-material producers after commodities erased gains. PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder by revenue, fell as accelerating inflation spurred traders to push up yields on interest-rate futures.

The Bovespa fell 2 percent to 51,243.62 at the close of trading in Sao Paulo, for a weekly loss of 2.1 percent. Sixty- one stocks slid on the index today while seven rose. The real gained 0.6 percent to 1.7706 per dollar. Brazil’s benchmark equity gauge accelerated its drop, tracking U.S. stocks, after Italy and Spain were downgraded by Fitch Ratings.

“Foreigners have been leaving the market because of worries about the crisis abroad,” said Clodoir Vieira, an economist at Sao Paulo-based brokerage Souza Barros Corretora. “There are still many uncertainties. The volatility should continue.”

Italy and Spain had their long-term issuer default ratings cut by Fitch on concern they will struggle to improve their finances as Europe’s debt crisis intensifies. The Standard & Poor’s GSCI index of 24 raw materials erased a gain of as much as 0.9 percent to close little changed.

Foreign Outflows

Brazil is stepping up efforts to fight insider trading after identifying suspicious patterns, chief securities regulator Maria Helena Santana said in an interview in Sao Paulo today. Her agency, known as CVM, is developing a new system to monitor markets and detect trading patterns on the days prior to earnings releases, she said.

Foreign investors have pulled 360.1 million reais ($203.4 million) from Latin America’s largest equity market in the year through September, data from the Sao Paulo exchange show.

Petrobras tumbled 2.9 percent to 18.30 reais. Net income estimates for this year and next were reduced at Bank of America, which cited a “slight” reduction in average production. Petrobras’s earnings estimates were reduced 5.1 percent for 2011 and 2.7 percent for 2012, according to a report today by Frank McGann, an analyst in Buenos Aires, and Conrado Vegner in Sao Paulo.

MMX, controlled by billionaire Eike Batista, lost 5.8 percent to 6.61 reais.

Inflation

Brazil’s inflation accelerated for the third straight month, limiting room for the central bank to speed up the pace of interest-rate cuts.

Consumer prices, as measured by the IPCA index, rose 0.53 percent in September from the previous month, the national statistics agency said today, the fastest pace since April. That was in line with analyst expectations for a 0.54 percent rise, according to the median estimate of 51 economists surveyed by Bloomberg. Prices rose 7.31 percent from a year ago.

PDG declined 4.3 percent to 6.25 reais as the BM&FBovespa Real Estate (IMOBBV) Index lost 1.5 percent.

The Bovespa entered a bear market in July after plunging 20 percent from its bull-market peak last year. The measure since extended that drop to 30 percent and trades at 8.8 times analysts’ earnings estimates, data compiled by Bloomberg show. That compares to a ratio of 9.2 for MSCI Inc.’s gauge of 21 developing nations’ equities.

Traders moved 5.62 billion reais in stocks in Sao Paulo today, compared to a daily average this year of 6.28 billion reais, data compiled by Bloomberg show.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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