Bovespa Index Falls Second Day as Commodity Prices Drop

The Bovespa index dropped for a second day as an unexpected decline in U.S. retail sales sent commodities prices to a nine-month low, dimming the outlook for Brazil’s raw-material producers.

Steelmaker Gerdau SA sank to the lowest since December

2011. Pulp producer Fibria Celulose SA fell for a third day. Plane builder Embraer SA dropped after saying it delivered 29 jets in the first quarter, down from 34 a year ago. Iron-ore producer Vale SA surged, erasing losses after Mines and Energy Minister Edison Lobao said Brazilian mining companies will probably avoid a special participation tax.

The Bovespa fell 0.8 percent to 54,962.65 at the close of trading in Sao Paulo, paring this week’s decline to 0.2 percent. Fifty-three stocks declined today while 15 rose. The Standard & Poor’s GSCI index of 24 raw materials dropped 1.3 percent to the lowest level since July after a report showed retail sales in the U.S. fell 0.4 percent in March, the most in nine months.

“Investors have been really optimistic about the outlook for the recovery in the U.S., but the retail sales figures today were disappointing,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “Global investors seem to be in a bad mood after the numbers.”

The median forecast of economists surveyed by Bloomberg called for an unchanged reading in U.S. retail sales.

Gerdau dropped 2.4 percent to 14.51 reais. Fibria lost 1.9 percent to 22.75 reais. Embraer declined 2.4 percent to 17.56 reais. Vale jumped 1.6 percent to 32.93 reais, erasing an earlier decline of as much as 2.1 percent.

Rate Outlook

The real climbed 0.3 percent to 1.9695 per dollar.

Homebuilder PDG Realty SA Empreendimentos & Participacoes dropped 4.3 percent to 2.70 reais, leading losses by companies that sell on credit, amid speculation policy makers may raise interest rates in the meeting scheduled to end April 17.

Brazil’s swap rates advanced after a report showed Brazil’s economic growth was faster than forecast in February and Finance Minister Guido Mantega said the government may take “unpopular measures” to tame inflation.

“The government won’t hesitate to take measures” to fight inflation, “including unpopular measures, like raising interest rates whenever needed,” Mantega said at an event today in Sao Paulo.

Brazil’s economic activity index, a proxy for gross domestic product, rose 0.44 percent in February from a year earlier, the central bank said today in a report posted on its website. The median estimate of 21 economists surveyed by Bloomberg was for a 0.10 percent increase.

Bovespa Valuation

The Bovespa has retreated 13 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 7.8 percent over the same period.

Brazil’s benchmark equity gauge trades at 11 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 7.62 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.43 billion reais this year through April 8, according to data compiled by the exchange.