BLBG: Brazil Stocks Fall, Paring Best Month Since May; Bolsa Climbs
Brazilian stocks dropped, paring the best monthly advance since May, on speculation government measures to boost growth won’t be sufficient as the global recession deepens.
Cia. Siderurgica Nacional SA led steelmaker declines after the U.S. economy contracted at the fastest pace in 26 years in the fourth quarter. Tam SA and Gol Linhas Aereas Inteligentes SA dropped after JPMorgan Chase & Co. said earnings may decline because of slowing demand for air travel. Banco Bradesco SA declined after being cut to “neutral” at JPMorgan.
“In the end all the data ended up hurting markets,” said Alvaro Bandeira, director of Agora Corretora in Rio de Janeiro. The smaller-than-expected contraction in the U.S. economy was “masked” by increases in company inventories, signaling a slowdown will continue in coming months, he said.
The Bovespa retreated 0.9 percent to 39,300.79. The measure gained 3.1 percent this week. Mexico’s Bolsa Index added 0.1 percent. Chile’s Ipsa lost 0.6 percent, trimming its best monthly rise since April 2007. The MSCI Emerging Markets Index slipped 0.5 percent.
The U.S. economy shrank 3.8 percent in the fourth quarter as consumer spending recorded the worst slide in the postwar era. GDP was projected to contract at a 5.5 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News.
Inventory Build-Up
A buildup of unsold goods cushioned the blow. Excluding inventories, the decline was 5.1 percent. A survey of purchasing managers also indicated today that business in January was the weakest in almost 27 years.
CSN, Brazil’s third-largest steelmaker, fell 2.6 percent to 35.18 reais. Bigger rival Usinas Siderurgicas de Minas Gerais SA dropped 1.2 percent. Gerdau SA, the biggest Latin American steelmaker, retreated 1.1 percent.
Gol, Brazil’s second-biggest airline, slumped 2.5 percent to 10.25 reais. Tam slipped 0.1 percent.
“We expect Brazilian air travel to deteriorate from recent growth levels (along with the broader Brazilian economy),” JPMorgan analysts Jamie Baker and Scott Tan wrote in a note to clients dated yesterday.
Bradesco, Brazil’s second-biggest non-state bank, fell 1.2 percent to 20.80 reais. JPMorgan analyst Saul Martinez cut his earnings estimates on bank “to incorporate greater than previously expected asset-quality deterioration.”
Rising Loan Defaults
Brazil’s central bank reported this week that loan defaults rose to a six-year high. Banco Itau Holding Financeira SA, which bought Uniao de Bancos Brasileiros SA to become Latin America’s biggest bank, fell 1.4 percent to 23.38 reais. Unibanco fell 1.9 percent to 13.11 reais.
Cia. Vale do Rio Doce declined for a second day, dropping 1.7 percent to 28.01 reais. The world’s biggest iron ore producer fell on concern it may have overpaid for Rio Tinto Group’s Corumba mine in western Brazil, said Alexandre Vianna, who helps manage the equivalent of $4.69 billion in Sao Paulo at Suladis DTVM, a unit of SulAmerica Investimentos.
Vale agreed to buy the potash and iron ore assets for $1.6 billion, the companies said today.
The BM&FBovespa MidLarge Index slipped 0.6 percent, while the BM&FBovespa Small Cap Index rose 0.2 percent.
The Bovespa gained 4.7 percent this month, the biggest advance since the index touched a record in May. The measure tumbled 41 percent in 2008 as the worst financial crisis since the Great Depression spurred a plunge in commodity prices.
Interest Rates
The monthly climb, the second-biggest in Latin America after Chile, came amid speculation lower interest rates will help bolster the economy. Brazil’s central bank last week lowered the overnight rate to 12.75 percent from a two-year high of 13.75 percent and said it was “carrying out immediately a significant part” of a new easing cycle.
Vale surged 17 percent for the month, the biggest gain since September 2007, on speculation demand for ore is recovering as China runs through its stockpiles. CSN, which also has iron-ore mining operations, rallied 21 percent.
Mexico’s Bolsa rose for the fourth time this week. Cia. Minera Autlan SAB surged 5.4 percent to 27.07 pesos, the highest price in two weeks. North America’s largest manganese producer said fourth-quarter sales rose an estimated 55 percent from a year earlier.
The Bolsa still tumbled 13 percent for the month amid signs of a deepening recession in the U.S., which buys about 80 percent of the country’s exports.
Chile’s Ipsa index fell today as Cia. Sudamericana de Vapores SA slid 1.9 percent to 420 pesos. Latin America’s biggest container ship company reported a net loss of $38.6 million for 2008 and forecast “important” losses this year.
The Ipsa rallied 7.3 percent this month on speculation government plans to start tapping $22 billion saved during the four-year boom in copper, Chile’s largest export, will keep the economy growing as interest rates fall.
