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Bovespa Index Drops to as Iron-Ore Price View Saps Vale

The Bovespa (IBOV) index fell to a two- week low as mining company Vale SA (VALE5), the world’s largest iron-ore producer, plunged after Goldman Sachs Group Inc. cut its price forecast for the steel-making material.

Steelmaker Cia. Siderurgica Nacional (CSNA3) SA, which gets about 22 percent of sales from its mining unit, was the worst performer on the equity gauge. Billionaire Eike Batista’s mining company MMX Mineracao & Metalicos SA (MMXM3) fell after posting a wider- than-estimated fourth-quarter loss.

The Bovespa dropped 1.1 percent to 56,361.24 at the close of trading in Sao Paulo. Forty-eight stocks fell on the measure while 18 advanced. The Standard & Poor’s GSCI index of 24 raw materials slid 1.1 percent as commodities sank even as the European Central Bank said it will provide liquidity to Cyprus after the country’s parliament rejected a proposed levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the nation’s bailout.

“I don’t see a positive scenario for Vale, which is probably going to be a drag on the Bovespa for a while,” Fernando Goes, an analyst at Sao Paulo-based brokerage Clear Corretora, said in a phone interview. “The events in Cyprus were a negative surprise. Even considering that its economy is very small when compared to the rest of Europe, we don’t know what will happen if they don’t get the bailout.”

Vale tumbled 3.9 percent to 32.39 reais, the lowest on a closing basis since Sept. 4. Iron ore, the main material used to make steel, will probably average $139 a metric ton this year, compared with a previous estimate of $144, Goldman Sachs analysts Christian Lelong and Jeffrey Currie wrote in a research report today.

MMX Earnings

Cia. Siderurgica Nacional SA sank 6.4 percent to 9.28 reais, the lowest since July 26. Newspaper Valor Economico said the company confirmed a $3.8 billion bid for ThyssenKrupp AG’s assets, citing sources it didn’t name. CSN’s press office in Rio de Janeiro declined to comment when contacted by Bloomberg News today.

MMX fell 0.9 percent to 3.16 reais. The producer posted an adjusted net loss of 348.7 million reais in the three months ended in December, compared with an average estimate for a loss of 48.7 million reais, according to data compiled by Bloomberg. Thirty-two of 46 companies that have already reported fourth- quarter earnings missed forecasts, data compiled by Bloomberg show.

MPX Energia SA, Batista’s power-generating unit, fell 4 percent to 10.32 reais. The billionaire is close to selling a stake in the company as he faces demands from creditors to boost collateral, people with direct knowledge of the matter said.

Interest-Rate Outlook

Some consumer stocks, including cosmetics maker Natura Cosmeticos SA (NATU3), advanced as traders pared bets for higher borrowing costs in Brazil. Swap rates on the contract due in January 2015 fell 0.04 percentage point to 8.53 percent amid speculation that policy makers may delay interest-rate increases in an attempt to shield the Brazilian economy from a worsening in Europe’s debt crisis.

“Concern that a worsening external outlook would hurt Brazil’s economic growth was the main reason the central bank used to start cutting rates in 2011 in the first place, so all these problems in Europe may affect its decisions again,” Flavio Serrano, a senior economist at Banco Espirito in Sao Paulo, said in a phone interview.

Natura climbed 2.4 percent to 49.39 reais.

The Bovespa has retreated 11 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index (MXBRIC) of shares in Brazil, Russia, India and China has slid 6.6 percent over the same period.

Brazil’s benchmark equity gauge trades at 11.4 times analysts’ earnings estimates for the next four quarters, compared with 10.7 for the MSCI Emerging Markets Index (MXEF) of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 7.07 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.63 billion reais this year through March 15, 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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