Brazil stocks slump, paced by slide in Petrobras

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — Brazilian stocks dropped nearly 3% Monday afternoon, with the benchmark hurt in part by a slide in shares of oil company Petroleo Brasileiro SA after the company’s fuel-price increases came in lower than had been anticipated.

Brazil’s Ibovespa


/quotes/zigman/1467794 BR:BVSP
-2.94%



fell 2.9% to 53,811.85, pushing its year-to-date loss to more than 5%, with all but one of the tracked sectors moving higher.

Click to Play

Mexico’s presidential election

Columnist Mary Anastasia O’Grady on why Mexican progress may depend on who comes in second in July’s presidential election. (Photo: Getty Images)

The market also lost ground alongside U.S. stocks, with investors holding low expectations that a meeting to be held later this week by European Union leaders will produce an effective strategy for curbing a debt and fiscal crisis that’s gripped the region in recent years.

On Wall Street, the SP 500 Index


/quotes/zigman/3870025 SPX
-1.70%



fell 1.5% and the Dow Jones Industrial Average


/quotes/zigman/627449 DJIA
-1.23%



lost more than 180 points during the session. European stocks also dropped Monday and Spanish bond yields surged ahead of the EU summit in Brussels on Thursday.
Read more about Monday’s action in European markets.

Weakening conditions in Europe factored into Citigroup’s decision to cut its 2012 growth forecast for China, the world’s second-largest economy as well as Brazil’s biggest trading partner. Citi also cited slower domestic growth as a reason it now expects China’s gross domestic product to expand 7.8%, down from its previous projection of 8.1%. It’s unlikely that China will enact a stimulus package similar to the one seen in 2008-2009 unless “the sovereign debt problem in Europe escalates to a full-blown economic and financial crisis and results in a deep recession in the continent,” Citi told clients on Monday.

In São Paulo trading, shares of Vale


/quotes/zigman/553117/quotes/nls/vale VALE
-2.45%



, an iron ore miner which counts China among its key markets, fell 2.3%. Steel stocks overall fell 3%, with Usiminas


/quotes/zigman/1467381 BR:USIM3
-6.48%



down 6.5% and Gerdau


/quotes/zigman/209047/quotes/nls/ggb GGB
-2.42%



1.9%.

Reuters

 

São Paulo, Brazil

 

Shares of Petroleo Brasileiro SA, better known as Petrobras


/quotes/zigman/265276/quotes/nls/pbr PBR
-8.67%



, were among of the worst performers, with preferred


/quotes/zigman/182970 BR:PETR4
-6.85%



and ordinary shares


/quotes/zigman/126670 BR:PETR3
-6.94%



each down 6.9% as an increase in energy prices became effective Monday. Late Friday, the company said it would raise gasoline prices by 7.83% and diesel prices by 3.94% on local currency terms. Recent reports put the expected price increase for gasoline at 10% and at 4% for diesel. Meanwhile, the Brazilian government cut federal taxes on fuels to zero.

Petrobras in a filing to regulators said the price hikes sought “to align the prices of oil products with international prices over the medium-to-long-term.” The price hikes are aimed at helping the company to fund its recently unveiled five-year, $236.5 billion investment plan, under which investment is expected to run about 5% higher from its previous program. Petrobras also cut its long-term output estimate by 11%.

Barclays Americas on Monday said its estimates assumed a 10% price increase for both gasoline and diesel prices. “The lower-than-expected fuel price increases Petrobras’ implied funding requirement,” wrote Barclays oil analyst Paul Cheng in a note to clients.

As a result of Petrobras’s price-hike levels, Barclays cut its third-quarter and fourth-quarter per-share earnings estimates for the state-run oil company to 68 cents per American Depositary Share and 72 cents per ADS, respectively. It had expected earnings of 74 cents a share and 78 cents a share, respectively, leading to a 2012 estimate of $2.80 a share. It had earlier projected full-year earnings of $2.90 a share.

“We lower our full-year 2013 estimate to US$3.30/ADS from US$3.55/ADS previously,” added Barclays.

Meanwhile, shares of oil and gas producer OGX Petroleo e Gas


/quotes/zigman/547873/quotes/nls/ogxpy OGXPY
-7.30%






/quotes/zigman/484492 BR:OGXP3
-7.03%



slumped 7% while refiner Ultrapar


/quotes/zigman/1475701 BR:UGPA3
-0.23%



slipped 0.2%.

Elsewhere in Latin American trading, Mexico’s IPC


MX:IPC
+1.44%



edged up 0.1% to 39,111. Standing out were shares of Grupo Modelo


MX:GMODELOC
+2.96%



. The stock leapt 20% to 117.69 pesos ($8.46) after the brewer of Corona beer said it has been in talks with expanding its relationship with Anheuser-Busch InBev


/quotes/zigman/558553/quotes/nls/bud BUD
+0.74%



.
More on Modelo’s talks with AB InBev.

Chile’s IPSA


CL:IPSA
-0.78%



equity index fell 0.9% to 4,318 and Argentina’s Merval


AR:MERV
-1.99%



lost 2% to 2,293.

/quotes/zigman/1467794

Add to portfolio

BR:BVSP

 

 

/quotes/zigman/3870025

Add to portfolio

SPX

 

 

/quotes/zigman/627449

Add to portfolio

DJIA

 

 

/quotes/zigman/553117/quotes/nls/vale

Add to portfolio

VALE

 

 

/quotes/zigman/1467381

Add to portfolio

BR:USIM3

 

 

/quotes/zigman/209047/quotes/nls/ggb

Add to portfolio

GGB

 

 

/quotes/zigman/265276/quotes/nls/pbr

Add to portfolio

PBR

 

 

/quotes/zigman/182970

Add to portfolio

BR:PETR4

 

 

/quotes/zigman/126670

Add to portfolio

BR:PETR3

 

 

/quotes/zigman/547873/quotes/nls/ogxpy

Add to portfolio

OGXPY

 

 

/quotes/zigman/484492

Add to portfolio

BR:OGXP3

 

 

/quotes/zigman/1475701

Add to portfolio

BR:UGPA3

 

 

Add to portfolio

MX:IPC

 

 

Add to portfolio

MX:GMODELOC

 

 

/quotes/zigman/558553/quotes/nls/bud

Add to portfolio

BUD

 

 

Add to portfolio

CL:IPSA

 

 

Add to portfolio

AR:MERV

 

 

Article source: http://www.marketwatch.com/story/brazil-stocks-slump-paced-by-slide-in-petrobras-2012-06-25?link=MW_latest_news