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Ibovespa Snaps Six-Day Gain as Usiminas Leads Steelmakers Lower

The Ibovespa dropped for the first time in seven sessions as Usinas Siderurgicas de Minas Gerais SA led a decline in raw-material exporters amid speculation that recent gains in Brazilian stocks were excessive.

Usiminas, as the steelmaker is known, and Cia. Siderurgica Nacional SA slid as UBS AG rated them as sell. Phone company Oi SA fell the most in two weeks. Homebuilder Even Construtora e Incorporadora SA sank after booked third-quarter sales fell 41 percent from the previous three months.

The Ibovespa benchmark sank 1.1 percent to 55,358.13 at the close of trading in Sao Paulo, with 34 of 73 member stocks lower. The gauge’s valuation reached a three-week high yesterday as measured by prices relative to estimated earnings as U.S. politicians agreed to fund the government through Jan. 15 and extend borrowing authority through Feb. 7.

“The fiscal problems in the U.S. weren’t solved, just postponed, and those issues still threaten the economic recovery,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by phone from Rio de Janeiro. “After some consecutive days of gains, we may see some profit taking.”

The real strengthened 1.1 percent to 2.1572 per dollar at 5:29 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials lost 1 percent as metals and crude oil dropped.

Usiminas fell 6.1 percent to 11.36 reais. UBS analysts Andreas Bokkenheuser and Rafael Cintra rated the stock a sell in new coverage, citing concern about the outlook for iron-ore and steel prices.

Earnings Outlook

“We expect a decline in iron-ore prices to result in a correction in steel prices, which we believe could weigh on Usiminas’s earnings going into 2014,” the analysts wrote in a research note to clients.

CSN, whose mining unit accounted for 26 percent of sales in 2012, declined 1.4 percent to 11.57 reais on its UBS sell.

OGX Petroleo e Gas Participacoes SA, the oil company founded by former billionaire Eike Batista, declined 15 percent to 40 centavos, after more than doubling in the prior three days. When commenting on news reports yesterday that the producer was about to get a capital injection from investors, OGX said in a statement that these were “assumptions from press professionals based on rumors.”

MRV Engenharia e Participacoes SA and Rossi Residencial SA both retreated 5 percent to 9.98 reais and 3.23 reais, respectively, leading declines in homebuilders. Brazil’s central bank said in minutes of its last policy meeting that the pace of increases in benchmark borrowing costs is appropriate, a sign that it will raise the target rate to 10 percent next month. Policy makers voted unanimously last week to lift it to 9.5 percent from 9 percent.

Even slipped 1.1 percent to 8.65 reais. Oi fell 6.3 percent to 4 reais.

Bull Market

The Ibovespa entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 14 percent in dollar terms this year, compared with a decline of 2 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo today was 7.18 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 7.57 billion reais this year through Oct. 15, according to data from the exchange.

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