Brazilian Stocks Decline on Commodity Slump; Bolsa Drops

By Alexander Ragir

Dec. 18 (Bloomberg) -- Brazilian stocks declined for a second day after oil and metal prices tumbled on concern the slowing global economy will reduce demand for commodities.

Petroleo Brasileiro SA and Cia. Vale do Rio Doce, the country’s two biggest stocks, fell more than 3 percent after oil prices dropped below $38 a barrel and copper tumbled to the lowest in four years. The Bovespa’s decline was limited as homebuilders and retailers rallied on speculation interest rates will be lowered. Gol Linhas Aereas Inteligentes SA rose for a third day on speculation lower oil may boost profit.

The Bovespa Index dropped 1 percent to 39,536.27. Mexico’s Bolsa lost 1 percent and Chile’s Ipsa gained 0.2 percent. The MSCI Emerging Markets index rose 0.2 percent.

Petrobras, which has the largest weighting in the index at 15 percent, fell 3.5 percent to 23.50 reais.

Brazil’s state-controlled oil company lost the most in two weeks on speculation the company may cut spending in 2009 after oil prices plunged 74 percent from a record.

“I don’t know that we necessarily can expect them to announce a headline number that is lower, but what they actually are going to spend next year, given the price of oil, I would expect it to be lower,” said Greg Lesko, who manages $750 million in emerging-market stocks at Deltec Asset Management in New York, including Petrobras.

Global miner Vale slid 4.1 percent to 25.31 reais.

The Reuters/Jefferies CRB Index of 19 commodities fell 2.2 percent.

Rate Outlook

Rossi Residencial SA, the third-biggest homebuilder, rose 1.1 percent to 3.60 reais. Lojas Renner SA, the largest publicly traded clothing retailer, climbed 3.2 percent to 16 reais.

“The committee considers that the risk of a less benign inflation scenario materializing has fallen compared to a few months ago, though remains a relevant possibility,” policy makers said, according to the minutes of their Dec. 9-10 meeting released today on their Web site.

The majority of policy makers discussed the possibility of cutting the benchmark interest rate by a quarter of a percentage point before deciding unanimously to leave the so-called Selic rate unchanged at 13.75 percent, citing an economic environment of “great uncertainty.”

The minutes may cement expectations that bank President Henrique Meirelles will cut rates at the bank’s next meeting Jan. 20-21, economists said.

Gol gained 7.8 percent to 11.22 reais. Fuel makes up about 40 percent of costs for airlines. Oil prices dipped to a four- year low yesterday after U.S. crude and fuel stockpiles gained and on concern OPEC members may not comply with agreed cutbacks.

Bolsa Gains

In Mexico, the Bolsa gained for a third day.

Coca-Cola Femsa SAB rose 2.9 percent to 56.21 pesos. Latin America’s biggest soft-drink maker is one of Citigroup Inc.’s top 10 Latin American stocks for 2009, the bank said in a report.

Grupo Mexico SAB fell for the first time in three days, retreating 4.7 percent to 9.12 pesos. Copper fell to the lowest in more than four years, with futures for March delivery slipping 4.6 percent in New York.

In Chile, Distribucion y Servicio D&S, Chile’s biggest grocer, rose 7.8 percent to 194.99 pesos, the most in two months on renewed speculation it will be acquired by another retailer.

“This stock is always with rumors that someone would buy it,” Alvaro Pipino, head of research at IM Trust, said. “There are new rumors around - although this time nothing specific on who the buyer would be.”

Elsewhere in Latin America, Argentina’s Merval fell 2.8 percent, Peru’s Lima General slid 2.9 percent and Colombia’s IGBC declined 1.8 percent.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;