Brazil’s Bovespa Stock Index Falls on Inflation Forecasts, Libya Concern

Brazil’s Bovespa stock index fell, retreating from last week’s advance, as Vale SA slid the most since August and continuing violence in Libya dimmed the outlook for global growth.

Vale tumbled, contributing most to the index’s decline, after metals prices dropped and Folha de S.Paulo reported that the Brazilian government is seeking 4 billion reais ($2.4 billion) of overdue royalty payments from the miner. Bradespar SA, part of the group that controls Vale, declined 3.7 percent. Cia. Siderurgica Nacional SA dropped after a report said the steelmaker plans to boost spending in the state of Minas Gerais by 67 percent to 15 billion reais.

The Bovespa lost 1.1 percent to 67,263.75 at the 4:15 p.m. New York time close. Thirty-four stocks fell on the index while 35 climbed. The real was little changed at 1.6540 per dollar.

“The market has very little liquidity” after the Carnaval holidays March 7 and 8, said Joao Pedro Brugger, who helps oversee 60 million reais at Leme Investimentos in Florianopolis, Brazil. “The main news is the Folha report on the fine the government is charging Vale. If that turns out to be true, it could have a negative impact in the short term.”

Vale fell 2.9 percent to 47.63 reais, the steepest drop on a closing basis since Aug. 30. Bradespar declined to 41.70 reais. The Bloomberg Base Metals 3-Month Price Commodity Index lost 2.5 percent.

The government is charging Vale overdue royalty payments on iron-ore exploration, Folha reported, citing an unidentified government official. The company’s Chief Executive Officer Roger Agnelli may meet Mines and Energy Minister Edison Lobao this week to discuss an agreement, the Sao Paulo-based newspaper said. Vale declined to comment, according to Folha.

Copper, Oil

Copper, a bellwether for global growth, fell to the lowest in more than two months on concern that demand may wane as higher energy costs slow the global economy. Crude oil rose as much as 0.9 percent in New York today, before erasing its advance, as Libyan leader Muammar Qaddafi stepped up attacks on rebel forces, fueling speculation that the conflict will persist.

CSN, Brazil’s third-biggest steelmaker, lost 1.6 percent to 26.45 reais. The company plans to boost its investment in the Brazilian state of Minas Gerais to 15 billion reais over the next few years, Valor Economico said, citing the state government and the company. CSN in 2009 announced a plan to invest 9 billion reais in the state, the Sao Paulo-based newspaper reported.

Inflation

Analysts covering the Brazilian economy raised their forecast for 2012 inflation, while reducing their prediction for this year’s. Consumer prices will rise 4.80 percent next year, up from a forecast of 4.78 percent the previous week, according to the median estimate in a March 4 weekly central bank survey of about 100 economists published today. The forecast for 2011 inflation fell to 5.78 percent from 5.80 percent previously.

Brazil’s benchmark equity gauge fell March 4 as surging oil prices raised the prospect of slower global economic growth, while real-estate shares fell on concern higher borrowing costs will hurt housing demand, and phone companies dropped after Tele Norte Leste Participacoes SA reported lower-than-forecast profit.

The Bovespa is down 3 percent this year after homebuilders and banks fell on concern rising inflation will spur additional measures to restrict credit growth, outweighing gains in oil and raw-material producers.

The index trades for 10.7 times analysts’ earnings estimates, according to weekly data compiled by Bloomberg. That compares to a ratio of 14.1 for the Shanghai Composite Index, 7.4 for Russia’s Micex, and 17.4 for India’s Sensex.