Iron-ore producer Vale SA capped its biggest weekly decline since May. Steelmaker Cia. Siderurgica Nacional SA was the worst performer on the index. College operator Anhanguera Educacional Participacoes SA (AEDU3) rallied after saying it doesn’t plan to alter its merger agreement with Kroton Educacional SA. (KROT3)

The Ibovespa fell 1.1 percent to 47,094.40 at the close of trading in Sao Paulo, extending its monthly drop to 1.1 percent. Fifty-seven stocks declined as 11 climbed. The real weakened 1.1 percent to 2.3443 per dollar. Gross domestic product in the U.S. grew at a 2.4 percent annualized rate from October through December, slower than the 2.5 percent increase that was forecast by economists surveyed by Bloomberg.

“For Brazil, which exports a lot to the U.S., that’s always bad news,” Pedro Galdi, the chief analyst at SLW Corretora in Sao Paulo, said in a phone interview.

The U.S. is Brazil’s biggest trading partner after China.

Vale fell 0.8 percent to 29.09 reais, pushing the weekly decline to 5 percent. CSN slumped 6.9 percent to 10.23 reais.

Anhanguera gained 4.6 percent to 13.13 reais. Kroton rose 0.2 percent to 43.70 reais. In a joint statement today, the companies denied a report that the terms of their merger are being reviewed.

Swap rates rose as the central government’s primary budget surplus, which excludes interest payments, fell to 12.9 billion reais in January, smaller than all of the forecasts of economists surveyed by Bloomberg and down from 14.5 billion reais in the prior month.

‘Muddling Through’

“The government’s announcement of the fiscal target last week helped calm investors, but the January numbers we saw today were already bad,” Joao Pedro Brugger, who helps oversee 400 million reais at Leme Investimentos Ltda., said in a phone interview from Florianopolis, Brazil. “The market has been muddling through, and I don’t see that changing. The outlook is still the same, with a lot of uncertainty.”

Finance Minister Guido Mantega said Feb. 20 that Brazil is cutting 44 billion reais from this year’s budget, allowing the government to meet a primary surplus target equal to 1.9 percent of GDP.

The Ibovespa has tumbled 17 percent from a bull-market high on Oct. 22 as inflation exceeded policy makers’ target and concern mounted that higher government spending will lead to a reduction in the country’s credit rating.

Trading volume of stocks in Sao Paulo today was 7.79 billion reais, according to data compiled by Bloomberg. That compared with a daily average of 6.4 billion reais this year, according to datafrom the exchange.

To contact the reporters on this story: Denyse Godoy in Sao Paulo atdgodoy2@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

http://www.bloomberg.com/news/2014-02-28/ibovespa-extends-monthly-decline-as-vale-sinks-with-commodities.html

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