Brazil Stocks Fall to Lowest in 3 Years on Outlook; Bolsa Drops

By Alexander Ragir and James Attwood

Oct. 24 (Bloomberg) -- Brazilian stocks fell to the lowest level in three years as slowing global growth, slumping commodity prices and the weakening real darkened the outlook for earnings.

Uniao de Bancos Brasileiros SA led declines in banks on concern tighter credit and trading losses may hurt future profits after it missed third-quarter earnings. Lojas Americanas SA dropped 14 percent after Itau Corretora said the biggest discount retailer is likely to report a loss on higher financing costs. Petroleo Brasileiro SA fell 10 percent as oil slid.

``It's almost as if the global financial system has just frozen and that will have a real impact on companies' earnings, on asset values everywhere,'' said John Ditierri, who helps manage $20 billion at Emerging Markets Management LLC in Arlington, Virginia. ``There is really nowhere that's safe.''

The Bovespa index dropped 6.9 percent to 31,481.55, the lowest level since November 2005. It has fallen 14 percent this week and 51 percent for the year. Mexico's Bolsa slid 4.6 percent. The MSCI Emerging Markets Index tumbled 7.9 percent. The Standard & Poor's 500 slid 3.5 percent.

Stocks tumbled around the world, sending the global benchmark index to the lowest level since June 2003. The FTSE 100 Index sank 5 percent and South Korea's Kospi Index fell 11 percent. The rout in Asia started after Samsung Electronics Co.'s profit fell, Sony Corp. slashed its earnings forecast and Toyota Motor Corp. sales dropped for the first time in seven years.

``This is a very bad crisis and there's a lot of forced selling by people that borrowed money to invest and have to sell because they are getting redemptions,'' said Edward Hocknell, who helps manage about $15 billion at Baillie Gifford Overseas Ltd. in Edinburgh. ``Markets have momentum in both directions. The fear and deleveraging may have more to come.''

Banks Plunge

Unibanco plunged 8.7 percent to 10.50 reais.

Unibanco's net profit of 704 million reais ($296.2 million) trailed the average analyst estimate of 776 million reais by 8.7 percent, Bloomberg data showed.

``There were rumors about trading losses,'' said Greg Lesko, who helps oversee $900 million at Deltec Asset Management Corp. in New York. The release of the earnings failed to assuage investors' concern, he said.

Banco do Brasil, Latin America's biggest bank, slid 2.6 percent to 12.75 reais.

The real slid 2 percent against the dollar today. The yen climbed against the dollar as the risk of a global recession prompted investors to slash carry trades, in which they fund purchases of higher-yielding assets with the Japanese currency.

BM&FBovespa MidLarge Cap index slid 7.2 percent, while the BM&FBovespa Small Cap index dropped 6.9 percent.

Lojas Americanas dropped 14 percent to 4.53 reais. The retailer may report a 3 million real loss, compared with profit of 8 million reais, Itau analysts said yesterday. Rival Lojas Renner slid 7.1 percent to 16.54 reais.

Commodity Slump

Petrobras fell 2.30 reais to 20.40 reais as crude oil plunged on concern the global economic slump is curbing fuel demand.

Mexico's Bolsa fell for a fourth day on concern about earnings and the weaker currency. The peso traded near a record low on concern the global economic slowdown will deepen, sapping demand for developing-nation exports.

Grupo Bimbo SAB slid 8.6 percent to 50.05 pesos. Mexico's largest baker reported third-quarter profit that trailed the average analyst estimate by 8.4 percent, Bloomberg data showed.

Grupo Financiero Banorte SAB fell 11 percent to 18.93 pesos after Mexico's biggest publicly traded bank posted third-quarter operating profit that trailed by 30 percent the average estimate by two analysts surveyed by Bloomberg.

Elsewhere in Latin America, Chile's Ipsa fell 2.2 percent, Peru's Lima General slipped 6.7 percent and Colombia's IGBC dropped 5.6 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net.