Brazil Stocks Fall as Industry Output Drop Adds to China Unease

  • Industrial output decline bigger than all analyst estimates
  • China yuan weakening boosts concern Brazil exports to suffer

Brazil’s benchmark stock gauge tumbled to a new six-year low, following a global rout, as a plunge in industrial production added to concern that demand for the nation’s exports will weaken further as China’s economy slows.

Brazil’s industrial production in November fell more than all analyst forecasts, indicating the Latin American nation’s worst recession in decades may have deepened even further in the fourth quarter. It comes as China moved to weaken its yuan, sparking a global selloff amid speculation that policy makers are struggling to revive an economy that’s the world’s biggest user of energy, metals and grains. China is Brazil’s largest export market.

"Industrial production data confirm what we already feared: that the economy is getting worse and worse,” Alvaro Bandeira, an economist at Banco Modal, said from Sao Paulo. “There’s no hope for 2016. If the government starts taking measures now to improve the economy, then we may have some positive impact in 2017."

Manufacturing output in November declined 2.4 percent from the previous month after a revised 0.6 percent drop in October, according to the national statistics agency. That was more than twice than the median 1 percent retreat forecast by economists surveyed by Bloomberg.

The Ibovespa declined 2.6 percent to 40,694.72 at the close of trading in Sao Paulo, as all but five of the gauge’s 61 members tumbled. Steelmaker Metalurgica Gerdau SA and pulp producer Suzano Papel e Celulose SA were among the biggest losers as concern over China sent commodity prices tumbling. A gauge of raw-material producers on the MSCI Brazil Index fell to a 12-year low.

"We’ll continue to live in uncertainty until there are signs that things in China aren’t so bad, and that there will be more stimulus there,” said Ari Santos, a trader at H.Commcor in Sao Paulo. “Commodities are falling hard, which makes everyone around the world a bit uncomfortable.”

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