Brazil Stocks Fall on Economic Concern, Commodities; Ipsa Dips

By Alexander Ragir

Jan. 8 (Bloomberg) -- Brazilian stocks fell for a second day after JPMorgan Chase & Co. reduced the country’s growth outlook and vehicle production fell to a nine-year low, heightening concern the economic slowdown is worsening.

Banco do Brasil SA led declines on the Bovespa index after JPMorgan said Brazil is in a “technical recession.” Usinas Siderurgicas de Minas Gerais SA, the biggest supplier of steel for the automotive industry, dropped for a second day after Brazilian vehicle production plunged 54 percent last month from a year earlier. Cia. Vale do Rio Doce, the world’s biggest iron ore miner, slumped 2 percent as metals prices sank.

“Short term we believe the market needs to digest the sharply rising risks to economic growth and earnings expectations,” JPMorgan strategist Ben Laidler wrote in a note to clients. “The market is not taking into consideration the potential for continued disappointing surprises on the real economy front.”

The Bovespa slumped 182.20, or 0.5 percent, to 40,638.05 at 8:37 a.m. New York time. Even with today’s loss, the index has gained 8.2 percent this year, spurred by the prospect of global stimulus measures boosting commodities demand. The Bovespa fell 41 percent in 2008, the steepest decline on record.

Banco do Brasil, Latin America’s second-biggest bank, fell 3.4 percent to 15.22 reais. JPMorgan cut its 2009 economic growth forecast for Brazil to 1.5 percent from a previous estimate of 2 percent, as the global recession weighs on industrial production and business confidence.

Vehicle Production

Usiminas sank 1.9 percent 29.47 reais. Vehicle output in the South American country declined to 102,053 cars, compared with a revised 222,132 in December 2007, the association, known as Anfavea, said today in a statement distributed in Sao Paulo. That’s the lowest since January 2000.

“The pain in manufacturing has been stronger and more widespread than expected at the onset of the credit crunch, back in September,” wrote Itau Corretora economists Guilherme da Nobrega and Luiz Cherman in a note sent to clients.

Vale fell 3.1 percent to 115.57 reais. The Bloomberg Base Metals 3-Month Price Commodity Index slid 3.5 percent to 119.97.

All America Latina Logistica, the transporter of commodities that is Latin America’s biggest railroad operator, dropped 1.9 percent to 9.81 reais on concern production cuts and slowing demand for raw materials will hurt earnings.

The UBS Bloomberg CMCI Index of 26 raw materials fell for a second day, losing 0.9 percent.

The BM&FBovespa MidLarge Cap index dropped 0.9 percent, while the Small Cap index was little changed. Chile’s Ipsa slipped 0.3 percent.

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