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Bovespa Posts Biggest Weekly Drop Since May on Global Slowdown

The Bovespa (IBOV) index posted its biggest weekly decline since May after economic data in the U.S. that trailed forecasts added to concern the global slowdown may deepen, dimming the outlook for Brazilian stocks.

Beef and poultry exporters BRF Brasil Foods SA and Marfrig Alimentos SA fell after JPMorgan Chase & Co. lowered its rating for both stocks to the equivalent of sell. Banco do Brasil SA led losses by banks after Goldman Sachs Group Inc. cut its recommendation to the equivalent of hold and Valor Economico said the state-controlled lender will lower some fees. Card payment processor Cielo SA tumbled the most since May 2010.

The Bovespa dropped 1.8 percent to 59,175.86 at the close of trading in Sao Paulo, pushing the weekly decline to 3.5 percent and trimming this month’s advance to 3.7 percent. Fifty- one stocks fell on the gauge today while 17 rose. The real strengthened 0.1 percent to 2.0269 per U.S. dollar at 5:46 p.m. local time.

“According to the data we’ve seen lately, the U.S. seems to be approaching a recession,” Rogerio Freitas, a partner at Rio de Janeiro-based hedge fund Teorica Investimentos, said in a phone interview. “We may be getting closer to a big correction in the equity market, as current prices don’t reflect in any way the actual state of the world economy.”

U.S. stocks dropped after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 49.7 this month from 53 in August. The Standard & Poor’s 500 index retreated 0.5 percent, pushing the measure down 1.3 percent for the week.

Banks Tumble

Banco do Brasil slumped 3.9 percent to 24.80 reais. Banco Bradesco SA tumbled 1.7 percent to 32.57 reais and Itau Unibanco Holding SA lost 2.9 percent to 30.59 reais.

Banco do Brasil’s decision to cut fees it charges customers is part of President Dilma Rousseff’s strategy to lower financing costs in Brazil, Valor Economico reported, citing unidentified government officials. Banco do Brasil’s press office didn’t comment on Valor’s report when contacted by Bloomberg News.

“Lower interest rates and fees will surely have a negative impact on the industry’s revenues,” Fausto Gouveia, who helps manage 380 million reais ($187 million) at Legan Administracao de Recursos, said by phone from Sao Paulo. “It’s another small piece of bad news in a day that’s already pretty ugly in the market.”

Marfrig tumbled 1.7 percent to 11.80 reais, snapping a five-day advance. Brasil Foods lost 1.7 percent to 35.01 reais.

Marisa Lojas, Cielo

Apparel retailer Marisa Lojas SA declined 3.8 percent to 25 reais after Banco BTG Pactual SA cut its recommendation to the equivalent to hold.

Cielo led declines on the Bovespa, falling 7.3 percent to 50.59 reais. Newspaper O Estado de S. Paulo reported that the government may take action to reduce fees card-payment processors charge retailers, citing Finance Minister Guido Mantega.

The Bovespa has climbed 8.9 percent this quarter as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted demand for equities. The index is up 4.3 percent this year and trades at 13.3 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.3 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 8.24 billion reais in stocks in Sao Paulo today, which compares with a daily average of 7.32 billion reais this year through Sept. 26, according to data compiled by 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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