Ibovespa Declines Most in World as Vale Tumbles on China Concern

Feb. 3 (Bloomberg) -- The Ibovespa fell the most among the world’s equity benchmarks as commodity exporters including iron-ore producer Vale SA sank amid concern growth is slowing in China, Brazil’s top trading partner.

Steelmaker Cia. Siderurgica Nacional SA dropped to a four-month low. Oil company Petroleo Brasileiro SA contributed the most to the gauge’s loss, falling to the lowest since 2005. Gafisa SA led homebuilders lower on concern policy makers will keep raising interest rates to curb inflation. Water utility Cia. de Saneamento Basico do Estado de Sao Paulo tumbled after offering a 30 percent discount to customers who cut consumption.

The Ibovespa dropped 3.1 percent to 46,147.52 at the close of trading in Sao Paulo, the most among 94 major equity gauges tracked by Bloomberg. All 72 of the benchmark’s member stocks declined. The real sank 0.9 percent to 2.4358 per dollar at 5:16 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials declined 0.6 percent. Commodity producers account for 35 percent of the Ibovespa’s weighting.

“Investors are turning away from countries that have strong links to China,” Gustavo Mendonca, an economist at Saga Capital, said in a phone interview from Rio de Janeiro. “With bad news coming from China and the weakening of the Brazilian economy, it’s hard for equities to rebound.”

China’s Purchasing Managers’ Index was at 50.5 in January, compared with the prior month’s 51 reading, according to the National Bureau of Statistics and China Federation of Logistics and Purchasing. Numbers above 50 signal expansion.

Vale, Gerdau

Vale retreated 3 percent to 29.10 reais. CSN, as Siderurgica Nacional is known, tumbled 5.1 percent to 10.62 reais. Petrobras sank 5.8 percent to 13.85 reais.

In Brazil, consumer prices will rise 5.7 percent next year, a central bank survey published today showed, above the government target of 4.5 percent. Gross domestic product will expand 2.1 percent in 2014, less than the average estimate of 2.79 percent for Latin America, according to analysts surveyed by Bloomberg. Brazilian swap rates, an indication of traders’ projections for interest-rate moves, rose on most contracts.

“The local economy won’t recover anytime soon,” Banco BTG Pactual SA analysts including Carlos Sequeira wrote in a note to clients today commenting on the outlook for Brazilian equities. “We see no reason to get excited.”

Gafisa slumped 6.8 percent to 2.86 reais, the worst performer on the BM&FBovespa Real Estate Index, which slipped 3 percent to the lowest since July 2009. Car rental company Localiza Rent a Car SA dropped 1.6 percent to 30 reais after posting fourth-quarter adjusted net income of 90 million reais, which compares with an average forecast of 90.6 million reais among analysts surveyed by Bloomberg.

Dry Spell

Sabesp fell 5.2 percent to 21.10 reais. The utility serving the state of Sao Paulo is trying to encourage customers to save water as a dry spell in some parts of Brazil drains dams to a record low. The drought will persist until Feb. 20 and rains expected in late February and March won’t be enough to refill reservoirs before the annual dry season, Celso Oliveira, a meteorologist at weather forecaster Somar, said in a telephone interview from Sao Paulo.

The Ibovespa has tumbled 18 percent from a bull-market high on Oct. 22 as inflation exceeded policy makers’ target for a third consecutive year and concern mounted that higher government spending will lead to a reduction in the country’s credit rating.

Trading volume of stocks in Sao Paulo was 6.86 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 6.22 billion reais this year, according to data from 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: Brendan Walsh at bwalsh8@bloomberg.net