Bovespa Futures Fluctuate as Europe Outweighs China Optimism

Bovespa-index futures fluctuated between gains and losses as concern Europe’s debt crisis is worsening outweighed speculation policy makers may act to boost growth in China, Brazil’s biggest trading partner.

Mining company Vale SA may move after it said first-quarter iron-ore production dropped 2.2 percent. Airlines Tam SA and Gol Linhas Aereas Inteligentes SA may be active after the Finance Ministry denied a report saying it may cut payroll taxes to boost competitiveness in the industry, according to an e-mailed statement.

Bovespa futures fell less than 0.1 percent to 62,760 at 9:41 a.m. in Sao Paulo after earlier rising as much as 0.1 percent. The real was little changed at 1.8614 per U.S. dollar.

“The main risk for equities is still Europe, as a worsening crisis over there increases risk aversion and makes investors think twice before buying in riskier markets such as Brazil,” Alexandre Ghirghi, who manages about 150 million reais ($80 million) at Metodo Investimentos, said by phone from Sao Paulo. “In China, growth may be a bit slower than it used to be, but it’s still robust. And the government has room to act in case the slowdown is deeper than expected.”

European stocks fell after non-performing loans for Spanish banks as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data. In China, investors speculated policy makers will ease monetary policy after home prices in the country fell in a record 37 of 70 cities tracked by the government in March.

Relative Value

Brazil’s benchmark equity measure has gained 10 percent this year, buoyed by local interest-rate cuts, signs of expansion in the U.S. and speculation Europe may be closer to resolving its debt crisis. The gauge trades at 10.4 times analysts’ earnings estimates, in line with the 10.4 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.64 billion reais in stocks in Sao Paulo yesterday, data compiled by Bloomberg show. That compares with a daily average of 7.11 billion reais this year through April 12, 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 in New York at papadopoulos@bloomberg.net

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