No Relief for Brazil Stocks as China Gloom Offsets Budget Win

  • Brazil Congress upheld president's veto of spending increases
  • Manufacturing gauge of Brazil's biggest trading partner fell

Brazilian stocks fell for a fifth straight day as optimism created by a rare victory for the government in damping spending proved short-lived amid concern that growth is faltering in China, the South American nation’s top trading partner.

Concern that China’s slowing economy will hurt exporters overshadowed a Congressional vote that upheld President Dilma Rousseff’s vetoes of spending increases. Rousseff’s economic team is seeking to slash spending this year and raise taxes to shore up the budget and avert another credit-rating cut.

"It’s very good news that the vetoes were upheld because it shows that the Brazilian government is not dead," Hersz Ferman, an economist at brokerage Elite Corretora, said from Rio de Janeiro. "But the situation is still very discouraging, and growth concern regarding China just makes everything worse. Investors are very cautious and in a wait-and-see mode."

The Ibovespa benchmark index fell 2 percent to 45,340.11 at the close of trading in Sao Paulo. Steelmaker Cia. Siderurgica Nacional SA plunged 21 percent, the biggest one-day slump since 2001, and competitor Usinas Siderurgicas de Minas Gerais SA lost 15 percent. Iron-ore miner Vale SA extended a three-day drop on concern that China’s slowing economy will damp demand for its raw materials. Lender Itau Unibanco Holding SA contributed the most to the gauge’s drop.

State-controlled oil producer Petroleo Brasileiro SA slumped to the lowest since 2003 as crude dropped. West Texas Intermediate for November delivery fell 3.6 percent, to $44.71 a barrel at 5:14 p.m. on the New York Mercantile Exchange. Petrobras has said its offshore investments are profitable with the commodity above $45.

Meatpacker JBS SA, which gets more than 80 percent of its revenue in foreign currency, rallied 3.7 percent as the real slumped to a record low of 4.1775 per dollar.

Traders have turned bearish on Brazil as the government struggles to persuade Congress to approve measures that include tax increases and spending cuts to avoid further downgrades of its credit rating. Standard & Poor’s reduced the country to junk on Sept. 9.

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