Bovespa Falls to Lowest in Week on Commodity Drop; Bolsa Slips

By Alexander Ragir

April 20 (Bloomberg) -- Brazil’s Bovespa index fell to the lowest in more than week after commodity prices tumbled and economists forecast a bigger contraction for Latin America’s largest economy this year.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, slid 1.5 percent as oil fell the most in three weeks. Cia. Vale do Rio Doce, the world’s biggest iron ore miner, sank 1.6 percent as metal prices retreated. Itau Unibanco Banco Multiplo SA, Latin America’s biggest bank, declined more than 2 percent on concern a slowing economy will cut demand for loans.

“You’ve moved from many distressed valuations to fair value,” said Bill Rudman, who helps manage $1.5 billion at Blackfriars Asset Management in London. “We wouldn’t be adding at this point” to the country’s stocks.

The Bovespa declined for a second day, losing 2 percent to 44,876.25 at 9:28 a.m. in New York. Brazilian stocks fell on April 17, paring a weekly gain, on concern demand from China won’t sustain commodity prices and the prospect earnings estimates may need to be cut as global growth slows this year.

The six-week advance in the Bovespa pushed its price-to- earnings ratio to a nine-month high of 14.7 last week, 31 percent more expensive than the five-year average, according to data compiled by Bloomberg.

Analysts reduced 2009 earnings estimates last week to the lowest level since Bloomberg began compiling the data in 2006 as Brazilian companies scaled back output in a recession that economists predict will be the most severe since 1992.

Worsening Economy

Brazil economists forecast the economy will contract 0.49 percent this year, bigger than the 0.3 percent average of the previous week’s central bank survey of about 100 economists.

The Bloomberg Base Metals 3-Month Price Commodity Index lost 2.4 percent to 138.57. The Dollar Index, a measure against six counterpart currencies, rose for a fifth consecutive day, making dollar-denominated commodities more costly for those holding other currencies.

Vales decreased 46 centavos to 29.34 reais.

Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker, fell 2.4 percent to 39.31 reais on concern lower metal prices will hurt earnings.

Benchmark steel prices in China have dropped 9 percent since February, according to Beijing Antaike Information Development Co. China’s steel prices will fluctuate at a low level this year because of the industry’s overcapacity, said Xu Lejiang, chairman of Baoshan Iron & Steel Co., China’s biggest steelmaker.

Petrobras dropped 46 centavos to 29.06 reais. Oil plunged more than 6 percent in New York.

Itau sank 71 centavos to 27.59 reais.

The index has climbed 19 percent this year on speculation government measures, falling interest rates and a recovery in commodity prices will boost growth. The gauge is up 56 percent from its Oct. 27 low.

In other Latin America markets, the Bolsa index slid 1.2 percent and Chile’s Ipsa retreated 0.4 percent.

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