Ibovespa Falls as Vale Sinks After Citigroup Recommends Selling

The Ibovespa fell for a second straight day after Citigroup Inc. recommended selling shares of Vale SA, the world’s biggest iron-ore producer.

Vale tumbled to the lowest level since 2006, the most among 15 global mining companies tracked by Bloomberg. Raw-material producers on the MSCI Brazil Index posted the biggest decline among 10 industry groups. Embraer SA rose after a Brazilian Congressional commission approved a bill to subsidize airlines flying local routes, bolstering the outlook for sales at the world’s largest regional jetmaker.

The Ibovespa lost 0.5 percent to 52,474.27 at the close of trading in Sao Paulo as 37 of its 70 stocks retreated. The real weakened 0.2 percent to 2.5563 per U.S. dollar. Citigroup analysts led by Alex Hacking lowered their recommendation on Vale to sell from neutral on falling expectations for the steelmaking ingredient price.

“The outlook for commodity prices is very uncertain, and that’s weighing on companies such as Vale,” Luis Gustavo Pereira, an analyst at brokerage firm Guide Investimentos, said by phone from Sao Paulo. “Vale is a well-managed company, but the macro environment is not very favorable to them.”

Vale slid 3.7 percent to 19.44 reais. Citigroup’s global commodity team reduced its forecast for iron-ore prices in 2015 and 2016 by 19 percent to $65 per ton. The Rio de Janeiro-based company is expected to generate $7.5 billion in operating cash flow next year, insufficient to cover planned investments, the analysts said.

Economic Outlook

Banco BTG Pactual SA lowered its recommendation on Brazilian equities to the equivalent of hold, citing a “challenging” economic outlook. Brazil still faces “uncertainties” as investors wait for President Dilma Rousseff to appoint an economic team for her second four-year term, BTG Pactual analysts said.

Embraer climbed 3.2 percent to 24.02 reais, the most since Oct. 31. The commission restored a provision limiting the number of seats subsidized as part of a regional aviation program to 50 percent of aircraft capacity or 60 seats, according to Dyogo Oliveira, the deputy executive secretary at the Finance Ministry. Last week, the seat limit had been eliminated, which would have allowed airlines to fly bigger planes.

The Ibovespa has declined 15 percent from this year’s high in September as the re-election of Rousseff on Oct. 26 ended speculation that a victory by an opposition candidate would help to boost growth and reduce intervention in state-owned companies.

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