Brazil Stocks Drop as Currency Strengthening Saps Export Outlook

  • Exporters including Vale fall as the real rises second day
  • Ibovespa heads to longest losing streak in over three months

The Ibovespa declined for the sixth consecutive session as gains in Brazil’s currency sapped the outlook for companies that depend more heavily on exports.

Vale SA, the iron-ore producer that gets about 85 percent of its sales outside Brazil, tumbled for an eighth day, its longest losing streak in more than a year. Steelmaker Gerdau SA, whose businesses in North America account for about 40 percent of revenues, sank the most on the MSCI Brazil/Materials Index.

Concern about falling commodity prices coupled with a deepening recession at home has fueled losses in Brazilian equities this year. Latin America’s biggest economy is heading toward its worst recession in more than a century amid a political crisis fueled by a corruption scandal that has discouraged businesses and consumers.

“There are a lot of uncertainties both in Brazil and abroad, and we still don’t know how all the issues we’re seeing at the moment will impact corporate earnings,” said Otavio Vieira, a partner at Rio de Janeiro-based hedge fund Fides Asset Management. “For equities, there’s still room for further losses.”

The Ibovespa fell 1.4 percent to 38,944.44 at the close of trading in Sao Paulo, extending its decline this year to 10 percent, as 46 of its 61 stocks declined. Vale lost 3 percent, falling to a 12-year low. Bradespar SA, a holding company that’s part of Vale’s controlling group, tumbled 6.4 percent. The real gained 0.3 percent to 4.0167 per dollar as emerging-market currencies gained on a report showing Chinese exports increased.

The stock benchmark earlier gained as much as 1.4 percent after a report from the national statistics agency showed retail sales in Brazil surged 1.5 percent in November, the most in a year. Economists had forecast a contraction of 0.8 percent, following a revised increase of 0.5 percent in October.

Clothing retailer Cia. Hering added 3.2 percent. Lojas Renner SA climbed 0.4 percent to 16.84 reais.

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