Brazil'ss Boves­pa stock in­dex sank, par­ing a fourth week of gains, af­ter Petroleo Brasileiro SA dropped and Bank of Amer­i­ca Cor­po­ra­tion said steel prices will like­ly fall in the coun­try. Petroleo Brasileiro SA, Brazil's state-con­trolled oil com­pa­ny, de­clined af­ter sell­ing shares in a USUS$70 bil­lion of­fer­ing at a 2 per cent dis­count to yes­ter­day's clos­ing price, small­er than some an­a­lysts es­ti­mat­ed. Ger­dau SA, Brazil' biggest steel­mak­er, dropped 4.6 per cent af­ter Bank of Amer­i­ca cut its rat­ing on the stock, cit­ing a weak price out­look. De­clines in the Boves­pa were lim­it­ed by a ral­ly in Vale SA, the world's biggest iron ore pro­duc­er, af­ter it ap­proved a stock buy­back of as much as USUS$2 bil­lion and pro­posed an ex­tra­or­di­nary div­i­dend.

"The steel sec­tor is drop­ping af­ter the down­grade," said Fabio Car­doso, a part­ner at Ad­in­vest Con­sul­to­ria, a Rio de Janeiro-based eq­ui­ty con­sult­ing firm. "Banks are giv­ing back some af­ter ral­ly­ing a lot late­ly. If it wasn't for Vale, we'd be falling a lot more." The Boves­pa dropped 0.9 per cent to 68,196.48. At least two stocks fell for every one that rose. The gauge is up 1.7 per cent this week, the biggest week­ly gain in three. It's slipped 0.6 per cent this year, pushed down by a 27 per cent drop for Petro­bras, the biggest stock in the in­dex, on con­cern the share sale would di­lute earn­ings.

Brazil­ian steel prices will prob­a­bly fall in the fourth quar­ter as ris­ing im­ports boost com­pe­ti­tion, Fe­lipe Hi­rai and Thi­a­go Lofiego, an­a­lysts at Bank of Amer­i­ca in Sao Paulo, wrote in a note to clients to­day. Ger­dau's earn­ings in the sec­ond half "are like­ly go­ing to dis­ap­point be­cause of high­er raw ma­te­r­i­al costs," the an­a­lysts wrote. Petro­bras fell 1.9 per cent to 26.30 reais. The com­pa­ny's USUS$70 bil­lion stock sale was an "abom­i­na­tion that treat­ed mi­nor­i­ty share­hold­ers un­fair­ly and may sig­nal share of­fer­ings are over­val­ued, said Mark Mo­bius, who over­sees about USUS$34 bil­lion as ex­ec­u­tive chair­man of Tem­ple­ton As­set Man­age­ment Ltd.

"The en­tire Petro­bras is­sue is an abom­i­na­tion and a ter­ri­ble vi­o­la­tion of share­hold­er rights," Mo­bius said in a tele­phone in­ter­view from Kaza­khstan. "We may be en­ter­ing an IPO bub­ble. It means that peo­ple are just not look­ing at the val­ues and ir­ra­tional­ly buy­ing these things." Petro­bras, based in Rio de Janeiro, sold 2.4 bil­lion com­mon shares for 29.65 reais each and priced 1.87 bil­lion pre­ferred stock at 26.30 reais a piece in the world's biggest share sale, ac­cord­ing to a state­ment late Thurs­day. (Bloomberg)