Bovespa Index Posts Weekly Decline as Commodities Drop

The Bovespa (IBOV) index posted its biggest weekly decline since November as a drop in commodities pushed Brazilian producers lower after a report showed China’s inflation accelerated more than forecast.

Iron-ore producer Vale SA, whose top export market is China, was the biggest contributor to the gauge’s decline. The MSCI Brazil/Materials index fell the most among 10 industry groups on concern China’s inflation will limit monetary easing to support economic growth. Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, was the worst performer on the Bovespa after reporting slower sales growth at supermarkets open at least a year.

Brazil’s benchmark equity index slid 0.3 percent to 61,497.43 at close of trading in Sao Paulo, extending its drop since Jan. 4 to 1.6 percent. Thirty-nine stocks fell today while 29 advanced. The real weakened 0.2 percent to 2.0339 per dollar. The Standard & Poor’s GSCI index of 24 raw materials lost 0.4 percent.

“Faster inflation in China is negative because it means less room for eventual stimulus measures that could strengthen the economy,” Pedro Galdi, the chief strategist at Sao Paulo- based brokerage SLW Corretora, said in a phone interview. “It’s pushing commodities lower, which has a big influence on the Bovespa. Vale is falling because of China.”

China’s consumer price index rose 2.5 percent in December from a year earlier, the National Bureau of Statistics reported today. That compares with the 2.3 percent median estimate in a survey by Bloomberg of 42 economists and a 2 percent gain in the previous month.

Vale, Pao de Acucar

Vale lost 2.6 percent to 39.53 reais, the steepest drop since Nov. 16.

Pao de Acucar sank 3.2 percent to 89 reais. Same-store sales at supermarkets rose 5.6 percent in the three months through December from the same period a year earlier, the Sao Paulo-based company said in a regulatory filing yesterday. The increase in the fourth quarter of 2011 was 8.7 percent.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- biggest steelmaker by output, advanced 0.4 percent to 12.09 reais. The producer is seeking to raise prices for its products by as much as 7 percent, according to a person familiar with the plan who asked not to be named because the increase hasn’t been made public. A press official for Usiminas in Belo Horizonte said yesterday that the company doesn’t comment on pricing.

While today’s session was affected by pessimism about China, the outlook for stocks this year is positive, said Alexandre Ghirghi, a portfolio manager at Metodo Investimentos in Sao Paulo. Equities should gain as more local investors are expected to seek higher returns after low interest rates made fixed-income assets less attractive, he said.

Bull Market

“The Bovespa will surprise many people in a good way this year,” Ghirghi said by phone. “People in Brazil were too used to sky-high interest rates, but those days are over and won’t come back. Little by little, people are realizing that the only way to make more money in Brazil is by moving to the stock market.”

The Bovespa entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its gain to 17 percent.

Brazil’s benchmark equity index trades at 11.1 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 8.5 billion reais in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.25 billion reais in 2012, 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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