Ibovespa Futures Drop as China Concern Pushes Commodities Lower

Ibovespa futures dropped, a sign the equity gauge may pare a weekly gain, as China ordered companies in 19 industries to cut production capacity, adding to concern that demand is set to slow in Brazil’s top trading partner.

Localiza Rent a Car SA, Latin America’s biggest car-rental company, may move after saying it plans to buy back as many as 9.04 million shares over the next year. Plane maker Embraer SA (EMBR3) may be active after reporting an unexpected loss.

Ibovespa futures contracts expiring in August fell 0.3 percent to 48,940 at 9:13 a.m. in Sao Paulo. The real declined 0.1 percent to 2.2446 per dollar. The Standard & Poor’s GSCI index of 24 raw materials fell 0.5 percent after China ordered more than 1,400 companies to cut excess production capacity this year, part of the country’s efforts to shift toward slower, more-sustainable economic growth.

“In Brazil, equities should fall, given the worsening of the external outlook,” Banco Bradesco SA’s economic team wrote in a note to clients today. “Commodities are trading lower, reacting to increased concern about China’s economic outlook.”

Commodities producers account for about 38 percent of the Ibovespa’s weighting.

Brazil’s benchmark equity gauge slumped 19 percent this year through yesterday, wiping out $227 billion from the value of Brazilian equities, according to data compiled by Bloomberg. The Ibovespa trades at 12.4 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume for stocks in Sao Paulo was 6 billion reais yesterday, which compares with a daily average of 7.7 billion reais this year through July 24, 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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