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Ibovespa Snaps Two-Day Advance as Vale Declines on China Concern

The Ibovespa dropped for the first time in three sessions as iron-ore producer Vale SA fell on concern that the economic slowdown is deepening in China, Brazil’s top trading partner.

Real-estate developer Multiplan Empreendimentos Imobiliarios SA tumbled after posting second-quarter earnings that trailed analysts’ estimates. Usinas Siderurgicas de Minas Gerais SA rallied after Banco Itau BBA SA, Morgan Stanley and Banco BTG Pactual SA all raised the steelmaker to the equivalent of buy.

The Ibovespa fell 0.4 percent to 49,212.33 at the close of trading in Sao Paulo. Forty-two stocks fell on the gauge while 26 advanced. The real weakened 0.6 percent to 2.2688 per dollar at 5:52 p.m. local time. Chinese stocks fell after the country’s industrial companies reported slower profit growth and the government ordered a review of state borrowing amid concern bad debts could weigh down the economy.

“I don’t see the Ibovespa going much higher than 50,000 if we don’t have any positive surprises in the short term,” Hamilton Moreira, an analyst at Banco do Brasil SA’s investment banking unit, said by phone from Sao Paulo. “In China, data on industrial profits and the debt review made investors a bit more cautious today.”

Vale, whose top export market is China, fell 1.2 percent to 28.90 reais, the most in two weeks. Multiplan lost 2.3 percent to 51.86 reais.

‘Regaining Competitiveness’

Usiminas, as Usinas Siderurgicas is known, rallied 4.8 percent to 9.43 reais. Shares have gained 24 percent in the past three sessions, the most in such span since September, as the steelmaker posted second-quarter earnings that exceeded analysts’ estimates.

“Usiminas is regaining competitiveness and this could lead to a positive earnings revision on the stock,” Itau BBA’s analysts Marcos Assumpcao and Andre Pinheiro wrote in a research note. They rate the stock outperform, meaning it’s expected to perform better than the market average.

Gafisa SA retreated 3.3 percent to 2.97 reais, the worst performer among homebuilders, as traders raised bets for higher borrowing costs in Brazil after economists lifted their 12-month inflation forecast for a fourth consecutive week, according to a central bank survey released today. Swap rates on the contracts due in January 2015 rose eight basis points, or 0.07 percentage point, to 9.48 percent. Retailer B2W Cia. Digital fell 1.7 percent to 11.96 reais.

The Ibovespa slumped 19 percent this year through July 26, wiping out $222 billion of market value, 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 10.3 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume for stocks in Sao Paulo was 4.45 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.66 billion reais this year through July 26, according to data compiled by the exchange.

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