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Ibovespa Futures Decline as China Dims Brazilian Export Outlook

Ibovespa futures dropped, a sign the stock gauge may snap a two-day rally, as China began a nationwide review of government borrowing amid concern bad debts may curb growth in Brazil’s top trading partner.

Real-estate developer Multiplan Empreendimentos Imobiliarios SA (MULT3) may move after posting second-quarter earnings that trailed analysts’ estimates. Usinas Siderurgicas de Minas Gerais SA may be active after Banco Itau BBA SA raised its recommendation on the steelmaker to the equivalent of buy.

Ibovespa futures contracts expiring in August fell 0.6 percent to 49,160 at 9:27 a.m. in Sao Paulo. The real slid 0.1 percent to 2.2580 per dollar. China’s State Council ordered the debt review, the National Audit Office said in a statement yesterday. The office suspended other projects for this “urgent” work requested on July 26 and will send staff to provinces and cities this week, People’s Daily reported yesterday on its website, citing sources it didn’t identify.

“We expect Brazilian equities to trade lower,” Banco Bradesco SA’s economic team wrote in a research note e-mailed to clients today, citing concern about the impact bad debts may have on China’s financial system.

The Ibovespa slumped 19 percent this year through July 26, wiping out $222 billion from the value of Brazilian stocks, according to data compiled by Bloomberg. Brazil’s benchmark equity gauge 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 5.04 billion reais on July 26, which compares with a daily average of .68 billion reais this year through July 25, 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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