Brazil stocks drop on China slowdown worries
LOS ANGELES (MarketWatch) -- Brazilian stocks dropped Tuesday, with steel stocks hit hard after trade figures from China underscored concerns about slowing in Brazil's key trading partner.
The Ibovespa (BVSP) fell 3.1% to 53,705.82, with investors returning from Monday's holiday to broad-based losses, led by a declines of nearly 5% each in the home building and steel sectors. The selloff followed Chinese government data showing imports in June grew at a pace that was weaker than anticipated.
Imports grew 6.3% from the year-ago period, well below the estimated 11.3% rate produced by a Dow Jones Newswires poll of analysts. Read more about China's June trade data.
Shares of Vale (VALE) (VALE5) fell 2.3% in São Paulo trading. Vale is the world's largest iron ore provider and counts China as a key export market. Also in the steel group, shares of CSN (SID) fell 7.8%, Usiminas (USIM5) declined 6.2% and Gerdau (GGB) lost 3%.
China's export shipments rose 11.3% for the month, higher than the 9% projected rise. but lower than the 15.3% rise seen in May. China this week will release growth data for the second quarter, as well as industrial output figures.
The soft report from China arrived a day before Brazilian officials are expected to build on its campaign to tackle sluggish economic conditions with another cut in the benchmark interest rate.
The "central bank is bound to cut rates by 50 [basis points] again, now to 8%, leaving the door open for further easing," analysts at BNP Paribas told clients Tuesday. "The reason is simple: Growth is frustratingly poor, as the real GDP proxy will show this week, with a probably negative reading in May, despite a likely positive retail sales print for that month."
The GDP proxy, known as the IBC-Br, will be released by the central bank.
Meanwhile, shares of state-run oil company Petrobras (PBR) fell 4.2% as crude for August delivery (CLQ2) slid 2.4% to $83.91 a barrel. Pressure on dollar-denominated oil prices stemmed from a climb in the U.S. dollar to a two-year high against the euro. Also Tuesday, the Energy Information Administration lowered its expectations for global demand for oil for this year and the next.
Among the session's worst performers in São Paulo, shares of home builder PDG Realty (PDGR3) stumbled 10% and Rossi Residencial (RSID3) fell 8.8%. Shares of Banco Santander (BSBR) (SANB11) paced losses in banking stocks, ending down 9.7%.