Brazilian Stocks Tumble as Vale Retreats on $4.2 Billion Charge

The Bovespa (IBOV) index retreated from a three-month high, paring its weekly gain, as mining company Vale SA sank on plans to book a $4.2 billion charge after reviewing the value of its nickel and aluminum assets.

Voting shares of Petroleo Brasileiro SA led declines by raw-material producers as commodities fell after U.S. House Republicans canceled a vote on higher taxes for top earners, fueling concern a failure of budget talks will cause a recession. Vale headed for its biggest one-day slump in five weeks and contributed the most to the gauge’s decline.

The Bovespa index tumbled 1.6 percent to 60,309.75 at 11:53 a.m. in Sao Paulo, reducing this week’s gain to 1.2 percent. Sixty-two stocks fell on the gauge today while four advanced. The real slid 0.2 percent to 2.0729 per U.S. dollar. The Standard & Poor’s GSCI index of 24 raw materials lost 0.3 percent, with oil down 1.1 percent.

“Vale’s impairment is negative for the stock and helps push the Bovespa index lower,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview. “The market is also being dragged down by the concern about the fiscal cliff. If the U.S. falls into a recession next year, the consequences for the world economy would be terrible.”

Vale fell 2.2 percent to 39.93 reais. The company said yesterday in a statement that it will take a $2.85 billion pretax writedown on a nickel project after operations stopped and prices for the metal declined. The producer also said it will also recognize a $1.3 billion pretax impairment on its 22 percent stake in Oslo-based Norsk Hydro.

Vote Canceled

Stocks tumbled worldwide after House Speaker John Boehner scrapped a plan to allow higher tax rates on annual income above $1 million, stalling talks on budget issues referred to as the fiscal cliff. The Congressional Budget Office has said that a failure to avert the more than $600 billion of tax increases and spending cuts scheduled to start in January would probably lead the U.S. to a recession in the first half of 2013.

The voting shares of Petrobras, as Petroleo Brasileiro is known, dropped 2.8 percent to 20.57 reais.

Brazil’s unemployment rate fell to 4.9 percent in November from 5.3 percent in October, the national statistics agency said today. That compares with the median forecast of 5.1 percent from 33 economists surveyed by Bloomberg.

While the jobless rate was a positive sign for Brazil’s economic activity, it was overshadowed by concern about U.S. budget talks, said Gustavo Mendonca, an economist at Oren Investimentos.

‘Good Shape’

“The report was good news for consumer stocks (MXWD), as it shows that labor market is still in good shape, but in a day like today the external outlook ends up overshadowing everything else,” Mendonca said in a phone interview from Rio de Janeiro.

Cia. Energetica de Minas Gerais, the electricity utility, serving the state of Minas Gerais, gained 4.3 percent to 26.71 reais after Banco Bradesco SA’s brokerage unit raised its recommendation to the equivalent of buy.

The Bovespa index has climbed 15 percent from this year’s low in June as stimulus from central banks around the world eased concern about an economic slowdown while record low benchmark lending rates has pushed some investors to move into stocks from fixed income.

The index trades at 11.4 times analysts’ earnings estimates for the next four quarters, which compares with 11 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.53 billion reais in stocks in Sao Paulo yesterday. That compares with a daily average of 7.28 billion reais this year through Dec. 19, 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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