Brazilian Stocks Fall on Credit Concerns, Led by Retailers

By Paulo Winterstein

Oct. 2 (Bloomberg) -- Brazilian stocks fell for the first time in three days, led by retailers, after commodity prices slid and Citigroup Inc. advised investors to sell consumer shares on concern the credit crisis will make it difficult to borrow money.

Lojas Americanas SA, Brazil's biggest discount retailer, led declines after Citigroup said Brazil is ``exposed to a drying-up of credit flows.'' Cia. Vale do Rio Doce, the world's biggest iron-ore producer, dropped after Merrill Lynch & Co. said slowing demand may lead to lower-than-expected ore price increases next year. Petroleo Brasileiro SA, Brazil's state-controlled oil company, fell as crude prices slumped for a second day.

The Bovespa index dropped 825.120, or 1.7 percent, to 48,973.53 at 9:33 a.m. New York time. The BM&FBovespa MidLarge Cap index dropped 1.8 percent, while the BM&FBovespa Small Cap index fell 1.2 percent. Mexico's Bolsa fell 0.4 percent.

Lojas Americanas paced declines for retailers, dropping 3.4 percent to 8.55 reais.

``Brazil appears exposed to a drying-up of credit flows given high debt ratios, short term debt repayments and variable cash flow generation,'' Citigroup strategist Geoffrey Dennis wrote in a note to clients. He also downgraded energy stocks to ``underweight'' from ``neutral.''

Lojas Renner SA, the biggest publicly traded clothing retailer, fell 2.6 percent to 23.49 reais. B2W Cia. Global do Varejo, the largest Internet retailer, fell 3.4 percent to 45.61 reais.

Rio de Janeiro-based Vale dropped 2.4 percent to 31.93 reais. Australian producers, including Rio Tinto Group and BHP Billiton Ltd., may win a 10 percent jump in contract prices, down from a previous estimate of 15 percent, Merrill Lynch analysts led by Vicky Binns said in a report dated yesterday. Vale may not get an increase next year, assuming it wins a planned 12 percent raise this half, she said.

Petrobras, as the Rio de Janeiro-based company is known, fell 1.1 percent to 34.51 reais. Oil dropped as much as 2.6 percent as the dollar reached a one-year high against the euro and U.S. fuel demand dropped to the lowest since the last recession.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.