Boston, MA 04/24/2014 (wallstreetpr) – Vale SA (ADR)(NYSE:VALE) declined sharply after the report showed that the manufacturing has slumped further in China. The drop in commodities led to the decline in the Ibovespa (IBOV). It is the biggest trading partner of Brazil. Vale SA saw a sharp decline in its stock price. It fell to the lowest level in last one month. The sharp decline in Vale SA resulted in significant fall in the IBOV index. The MSCI Brazil index was hit by the stock Fibria Celulose SA. It is a pulp producing company. In the other sector, Banco Itau BBA SA withdrew its buy recommendation for Raia Drogasil SA (RADL3).
The fall in index
The Ibovespa index closed at 51,569.69. It was down 0.8% for the day. Out of the total stocks, 59 stocks posted a losing streak while 14 stocks ended higher. The real was trading half a percent higher against the U.S. dollar. Base Metals 3-month price commodity index was also trading in red. The slowdown in China’s manufacturing is clearly seen in the PMI index released by HSBC Holdings Plc and Markit Economics.
The reason for fall
The slump in China’s manufacturing is not a good indicator for the Brazilian companies. China plays a very important role in boosting Brazil’s exports. At this time, investors are not optimistic about the export numbers. They are expecting the exports of commodities to fall down in the coming time. The anticipation is leading to the fall in stocks.
The silver lining
However, the further decline in Vale SA (ADR) (NYSE:VALE) came to halt with the speculation that China is going to take substantial measures to enhance the growth. If it happens then certainly it will be beneficial for Vale SA. Also, some of the other indicators came in line with the market expectations. Brazil’s official unemployment rate came at 5% in March as compared to 5.1% in February.
