Brazilian Stocks Decline on Banks Outlook, Earnings Concern

By Paulo Winterstein

Jan. 29 (Bloomberg) -- Brazilian stocks fell for the first time in five days on concern earnings at the nation’s biggest banks and commodity producers will decline as the global economic slowdown deepens.

Banco do Brasil SA led a retreat among banks after Goldman Sachs Group Inc. cut estimates on bank earnings for a second time this month. Cia. Vale do Rio Doce and Petroleo Brasileiro SA, Brazil’s biggest companies, declined after Ford Motor Co. reported the worst annual performance in its 105-year history.

“Ford earnings were worse than expected, and that’s hurting the market today,” said Januario Hostin Jr., chief equity portfolio manager at Leme Investimentos in Florianopolis, Brazil, which oversees about $35 million. “The profitability of our banks has been falling, and with interest rates falling, it’ll decline more.”

The Bovespa retreated 0.6 percent to 39,978.87 at 8:47 a.m New York time. Chile’s Ipsa dropped 0.5 percent. The MSCI Emerging Markets index added 0.4 percent.

Ford posted a full-year loss of $14.6 billion and a quarterly net loss of $5.9 billion. The only U.S. automaker shunning federal loans said it would tap its credit line, making available $10.1 billion in cash in the first quarter.

Petrobras, as the state-controlled oil company is known, dropped 1.1 percent to 24.93 reais. Crude oil fell in New York after U.S. inventories gained more than expected last week and refiners reduced output as demand declined.

Vale, the world’s biggest iron-ore producer, fell 1.7 percent as metal prices declined in London.

Banco do Brasil fell 1.4 percent to 14.50 after trading as low as 14.38 reais.

“As economic conditions continue to deteriorate and the Brazilian central bank lowers rates, conditions for 2009 become incrementally less favorable for Brazilian banks,” Goldman analyst Jason Mollin wrote. “Greater consumer exposure makes them more pro-cyclical than ever, an unfavorable characteristic going into an economic downturn.”

Banco Itau Holding Financeira SA, Latin America’s biggest bank, fell 1 percent to 24.23 reais.

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