Ibovespa Declines as Vale Sinks With Commodities, CCR Tumbles

The Ibovespa fell, extending the biggest selloff among major emerging-market benchmarks, as commodity price declines pushed down exporters amid concern that growth is faltering in China, Brazil’s top trading partner.

Iron-ore producer Vale SA sank to four-year low, contributing the most to the benchmark stock gauge’s decline. OSX Brasil SA, billionaire Eike Batista’s shipping unit, tumbled after Folha de S.Paulo reported that the company missed a 500 million real payment to a service provider. OSX denied the report. Highway operator CCR SA retreated as the state of Sao Paulo scrapped toll increases scheduled for July 1.

The Ibovespa tumbled 2.3 percent to 45,965.05 at the close of trading in Sao Paulo, extending this year’s decline to 25 percent, the most among major emerging markets. Fifty-seven of 71 stocks on the measure fell today. The real gained 0.7 percent to 2.2268 per dollar. The Bloomberg Base Metals 3-Month Price Commodity Index slumped 1.8 percent.

“What was already bad is getting worse,” Daniel Cunha, the chief economist at brokerage XP Investimentos, said by phone from Sao Paulo. “Brazil lacks economic growth, and inflation is under pressure. And now that the things abroad are getting worse, equities will probably keep suffering.”

China’s central bank said the nation should fine-tune its policies as a cash squeeze in the banking system risks exacerbating an economic slowdown. The UBS Bloomberg Constant Maturity Commodity Index of 27 raw materials slid 0.5 percent. Commodity producers account for 39 percent of the Ibovespa’s weighting, according to data compiled by Bloomberg.

Economic Outlook

Vale sank 5.5 percent to 26.89 reais. OSX tumbled 12 percent to 1.39 reais. Steelmaker Usinas Siderurgicas de Minas Gerais SA dropped 7.9 percent to 7.46 reais as the MSCI Brazil/Materials Index posted the biggest decline among 10 industry groups.

Economists lowered their forecast for Brazilian growth this year to 2.46 percent from 2.49 percent the previous week, according to a survey published by the central bank today. The median estimate for 2014 growth was lowered to 3.1 percent from 3.2 percent, the report showed.

Retailer Cia. Hering slipped 2.4 percent to 31.71 reais. Cosmetics maker Natura SA dropped 3.2 percent to 46.23 reais. Cia. de Bebidas das Americas, the brewer also known as AmBev, fell 1.7 percent to 76.38 reais.

CCR dropped 3.3 percent to 16.25 reais. Sao Paulo Governor Geraldo Alckmin said the state will cancel toll increases of as much as 6.5 percent scheduled for July 1. EcoRodovias Infraestrutura & Logistica SA fell 2.7 percent to 14.50 reais. Arteris SA slipped 3.5 percent to 18.15 reais.

Nationwide Protests

Sao Paulo canceled the toll increase after last week scrapping a fare increase for buses, trains and subways that sparked the biggest street protests in almost two decades. Two died and hundreds were injured as 1 million took to the streets throughout Brazil to demand cheaper bus fare, better schools and more hospitals.

“The political situation in Brazil has deteriorated, which adds to investors’ concern about the country,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores SA, said by phone from Sao Paulo. Parana is acting to limit increases in electricity rates, Sao Paulo is doing the same with toll fares, and no one really knows what the impact on the companies will be.’’

The Ibovespa slumped into a bear market on June 11 after falling more than 20 percent from this year’s peak on Jan. 3. It has since extended those losses to 27 percent. Brazil’s benchmark equity gauge trades at 11.6 times analysts’ earnings estimates for the next four quarters, compared with 9.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Foreign investors have pulled 4.9 billion reais from Latin America’s largest equity market this month through June 19, data from the exchange show. Trading volume for stocks in Sao Paulo was 9 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.9 billion reais this year through June 20, according to data from the exchange.

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