Ibovespa Retreats as China Growth Outlook Sinks Vale

The Ibovespa fell as iron-ore producer Vale SA tumbled for a fifth day amid concern that growth is slowing in China, dimming the outlook for Brazilian raw-material producers.

Oil company OGX Petroleo & Gas Participacoes SA contributed the most to the stock benchmark’s decline, snapping a three-day rally. The MSCI Brazil/Materials Index fell the most among 10 industry groups. Centrais Eletricas Brasileiras SA led gains among Brazilian utilities after its first-quarter loss was smaller than some analysts had forecast.

The Ibovespa lost 0.3 percent to 54,772.62 at the close of trading in Sao Paulo. A report showed foreign direct investment in China rose 0.4 percent from a year earlier in April, below the 6.2 percent projection of analysts surveyed by Bloomberg. Stocks extended losses as Federal Reserve Bank of San Francisco President John Williams said the Fed may begin slowing the pace of its bond purchases in coming months, paring back its efforts to bolster growth in the world’s biggest economy.

“Metal prices are still mostly driven by China,” Andres Calderon, a portfolio manager at Hansberger Global Investors, which oversees $6.2 billion in assets, said in a telephone interview. “To the extent that you have growth and fixed investment growth concerns in China, you’re going to see iron-ore price have a negative bias to it.”

Thirty-eight stocks fell on the Ibovespa today while 31 gained. The real weakened 0.2 percent to 2.0265 per dollar. Iron ore slumped into a bear market on concern that slowing economic growth in China, the world’s biggest buyer of the steel-making raw material, will hurt the outlook for demand as global supplies increase.

Vale, OGX

Vale sank 2.4 percent to 29.70 reais. The MSCI Brazil/Materials declined 1.8 percent. OGX tumbled 4.8 percent to 1.79 reais.

Cia. Brasileira de Distribuicao Grupo Pao de Acucar led declines among retailers after a report showed that economic growth trailed estimates in March.

Brazil’s seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.72 percent in March after a revised 0.36 percent drop in February, the central bank said today in a report posted on its website. The median estimate of 24 economists surveyed by Bloomberg was for an increase of 0.85 percent.

“The central bank’s activity index came in a bit weaker than expected, which points to a scenario for growth this year that’s not very exciting,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “The outlook for equities is still challenging. Not much happening right now that points to a strong rebound.”

Pao de Acucar dropped 2.5 percent to 110.60 reais.

Oi Slides

Voting shares of phone company Oi SA slumped 4.9 percent to 5.21 reais, the biggest decline on the Brazilian benchmark. The shares are being removed from the MSCI Brazil Index, MSCI Inc. said in a statement yesterday after the markets closed.

Eletrobras, as Centrais Eletricas is also known, rose 13 percent to 9.39 reais after reporting a net loss of 35.8 million reais, less than the 180 million reais that analysts at Citigroup Inc. had forecast.

The Ibovespa has lost 10 percent this year, the worst performer among 19 major emerging markets, according to data compiled by Bloomberg. Brazil’s main equity index trades at 12.2 times analysts’ earnings estimates for the next four quarters, compared with a 10.9 multiple for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 8.15 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.71 billion reais this year through April 30, according to data compiled by the exchange.

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