Bovespa Tumbles as Brazil Economic Growth Slows, Europe Shrinks

The Bovespa index slumped the most in five months as Brazil’s economy posted its second-worst performance in eight years and raw-material producers followed commodities lower after Europe’s economy contracted in the fourth quarter.

Iron-ore producer Vale SA (VALE5) plunged as metals prices fell and after saying in a statement it was charged 1.6 billion reais ($910 million) as part of a fight over unpaid tax claims in Brazil. The company said it will file an appeal. ALL America Latina Logistica SA (ALLL3), Latin America’s largest railroad company, fell after it reported a fourth-quarter net loss of 32.5 million reais, according to a regulatory filing.

The Bovespa sank 2.8 percent to 65,114.15 at the close in Sao Paulo, the biggest one-day decline since Oct. 3. Sixty-six stocks fell on the gauge, while four gained.

“We’re seeing weaker economic data all around the world, which doesn’t support the optimism that has spread through the markets this year,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by phone from Rio de Janeiro. “In Brazil, numbers show that the economy is weak, growing at a pace that’s slower than the government was hoping for.”

Brazil’s gross domestic product grew 2.7 percent in 2011, from a 3.7 percent expansion in 2010, the national statistics agency said today. The forecast was for 2.8 percent growth, according to the median estimate from 32 economists in a Bloomberg survey.

Car Sales Drop

A report today from the National Vehicle Manufacturers Association showed car sales in Brazil fell 9 percent in February from a year earlier, after increasing 9.6 percent in January.

The economy will expand 4.5 percent in 2012, Finance Minister Guido Mantega told reporters in Brasilia after the GDP report was released. Brazil will offset the impact of slower global growth by maintaining a weaker exchange rate, lowering interest rates and taking other steps to stimulate the economy, he said.

The real declined 1.1 percent to 1.7584 per U.S. dollar.

In the interest-rate futures market, yields on most contracts fell after the GDP report was released. The yield on the contract due in January 2013 slid two basis points, or 0.02 percentage point, to 9.01 percent.

Europe’s economy contracted in the fourth quarter as investment declined by the most since 2009 and exports and consumer spending dropped, according to the European Union’s statistics office.

Vale Tax Dispute

Vale dropped 4.4 percent to 40.17 reais. The company, involved in two tax disputes with Brazil, said in a statement it lost a bid to get part of the claim for tax liabilities on its non-Brazilian domiciled units treated as an administrative dispute and will now pursue it in court.

The Bloomberg Base Metals 3-Month Price Commodity Index (CMDIBAS3) declined 2.8 percent. The Standard & Poor’s GSCI Spot Index of 24 commodities lost 1.5 percent by the close in New York, its biggest drop since Dec. 14.

ALL slid 1.5 percent to 9.92 reais.

Minerva SA (BEEF3) rose 6.6 percent to 6.99 reais. The Brazilian meatpacker reported net income of 15.1 million reais in the fourth quarter, according to a regulatory filing. Earnings before interest, tax, depreciation and amortization, a measure of profit known as Ebitda, was 116.4 million, or 10.7 percent of the company’s net revenue in the fourth quarter, up from 9.8 percent a year before.

Citigroup’s ‘Preferred Market’

Brazil is Citigroup Inc.’s “preferred market” in Latin America, followed by Peru, strategist Jason Press said on Bloomberg Radio’s “Bloomberg Surveillance.” The country “benefits from lower interest rates and resilient earnings, both among domestic sectors as well as some of the metals and mining companies,” Press said.

The Bovespa has advanced 15 percent this year after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The gauge trades at 10.5 times analysts’ earnings estimates, in line with the 10.5 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 7.44 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.22 billion reais this year through March 1, according to data from the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

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

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