Brazil Stocks Fall for 4th Day on Commodity Slump; Bolsa Drops

By Alexander Ragir and William Freebairn

Nov. 19 (Bloomberg) -- Brazilian stocks dropped for a fourth day, led by raw-material producers, as commodity prices fell and analysts said steel demand will likely slow through next year.

Usinas Siderurgicas de Minas Gerais SA and Gerdau SA lost more than 5 percent after UBS AG said cuts in steel production show a drop in demand. Cosan SA Industria & Comercio fell the most in a week after RBC Capital Markets said the sugar-cane processor will likely ``be vulnerable to a cyclical downturn.''

``We're a market very tied to commodities and we're not seeing much good news flow on that front,'' said Rodrigo Bresser- Pereira, a hedge fund manager at Bresser Administracao de Recursos in Sao Paulo. ``The future seems much less visible now.''

The Bovespa slid 2 percent to 33,404.55. The BM&FBovespa Small Cap index retreated 1.2 percent. The BM&FBovespa MidLarge Cap index declined 2.3 percent. Brazilian markets will be shut tomorrow for a holiday.

Mexico's Bolsa dropped 2.4 percent and Chile's Ipsa fell 0.3 percent. In the U.S., the Standard & Poor's 500 Index slid 6.1 percent to its lowest close since 2003 on growing concern over the fate of the nation's car industry and economic data signaling the recession is deepening.

Gerdau, Latin America's biggest steelmaker, slumped 6.5 percent to 12.15 reais. Accelerating cuts in global steel production show a drop in demand that will likely last through 2009, UBS analysts wrote in a note to investors. About 60 percent of Gerdau's sales in 2007 were from exports.

Usiminas, Brazil's second-biggest steelmaker, dropped 5.7 percent to 20.13 reais. Usiminas said it plans to work on a blast furnace, reducing production of pig iron by 300,000 tons, or 3 percent of current capacity.

Cosan Slides

Tin, copper, lead and nickel prices all dropped in London as rising stockpiles signaled production is outpacing demand from industry. The Bloomberg Base Metals 3-Month Price Commodity Index fell 2.7 percent to its lowest level since September 2005.

Cosan slid 7.2 percent to 10.20 reais. Higher financing costs at a time of ``slim'' margins ``may present a serious challenge'' for Cosan, the RBC analysts wrote. Sao Martinho SA, Brazil's second-biggest publicly traded sugar and ethanol producer, dropped 5.5 percent to 9.30 reais.

Brazil's economy may undergo a ``sharp deceleration'' in the fourth quarter as consumers buy fewer goods because of the growth slowdown and credit squeeze, Merrill Lynch & Co. said today.

``All indicators point to an acute deterioration in domestic demand already in October, as consumers reacted to the severe tightening of credit conditions,'' Merrill strategists wrote in a note to clients today. ``We continue to expect a sharp deceleration of domestic activity in the fourth quarter.''

The Brazilian economy may expand 4.9 percent in 2008, according to a forecast by Merrill strategists. That's below the average estimate of 5.2 percent growth for 2008 in a weekly central bank survey of about 100 economists published Nov. 17.

Bolsa Drops

In the U.S., the cost of living fell by the most on record and construction began on the fewest homes ever last month, evidence the economy is in the worst recession in at least a quarter century.

Mexico's Bolsa dropped for a third day, slipping to the lowest this month.

America Movil SAB, Latin America's biggest wireless carrier, fell to the lowest in a week after Pali Research said its share of new subscribers in Brazil was below forecasts. America Movil dropped 3.8 percent to 19.45 pesos.

Grupo Mexico SAB, Mexico's biggest mining company, dropped to the lowest since Oct. 17 after JPMorgan Chase & Co. said it may have $4.8 billion in legal claims related to a bankrupt U.S. unit and its environmental liabilities. Grupo Mexico fell 8.9 percent to 7.49 pesos.

Elsewhere in Latin America, Argentina's Merval lost 2.1 percent, Peru's Lima General index fell 2.1 percent and Colombia's IGBC slid 0.3 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.