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Ibovespa Drops as China Concern Offsets Brazil Inflation Report

The Ibovespa fell, snapping a three-day winning streak, as China’s reduced industrial production growth overshadowed slower-than-forecast inflation in Brazil.

Vale SA, the world’s largest iron-ore producer, contributed the most to the equity gauge’s drop on concern about the data from China, its largest export market. Homebuilder Gafisa SA was the best performer on the index as investors pared bets on higher borrowing costs in Brazil.

The Ibovespa slid 0.3 percent to 50,993.02 today in Sao Paulo, with 43 stocks lower and 22 higher. The real strengthened 0.4 percent to 2.3078 per U.S. dollar at 2:33 p.m. in New York. Factory output growth in China, Brazil’s most important trading partner, slowed to 10 percent in November from a year earlier.

“Investors are concerned that officials in China may be willing to set a lower growth rate target,” Felipe Rocha, an analyst at the brokerage firm Omar Camargo, said by telephone from Curitiba, Brazil.

Chinese leaders today opened their annual central economic work conference to set goals and policies for 2014, according to the official Xinhua News Agency.

Vale fell 0.9 percent to 32.85 reais. Gafisa advanced 3.8 percent to 3.53 reais, its highest price on a closing basis since Oct. 15. The homebuilder also concluded the sale of a 70 percent stake in Alphaville Urbanismo SA, which focuses on high-income projects, for 1.54 billion reais ($668 million).

Inflation Report

The Ibovespa gained as much as 0.3 percent earlier today as the Getulio Vargas Foundation reported that wholesale, construction and consumer prices climbed 0.32 percent in the 10 days starting Nov. 21. The median forecast was for an increase of 0.41 percent.

“Slower inflation could make the central bank reduce the pace of increases in its benchmark interest rate, which is good for companies that sell in the country and helps the stock market to get more money from investors who were in fixed income,” Sandro Fernandes, a trader at the brokerage firm Geraldo Correa, said in a telephone interview from Belo Horizonte, Brazil.

Policy makers have boosted borrowing costs by 2.75 percentage points since April to combat inflation that has remained above the government’s 4.5 percent target for more than three years.

Brazil’s benchmark equity index 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 26 percent in dollar terms this year, compared with a decline of 4.1 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 4.59 billion reais yesterday, compared with a daily average of 7.48 billion reais this year, according to data from the exchange.

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