Falling Commodity Prices Push Brazilian Stocks Down

Bovespa plunges as falling commodity prices put pressure on the Brazilian stock market.

As commodities go, so goes Brazil, and that has been shown again to be true as falling commodity prices pushed the Bovespa to its lowest levels since November 21, 2008, dropping 2,179.47 to 39,403.47, a 5.2 percent loss.

That effectively wiped out half of the gain since the beginning of the year. Much of the rise in the first part of the year was from the illusion the stimulus plans implemented around the world would push up the demand for commodities, which Brazil relies so strongly on.

Even so, long term Brazil will do well, as sooner or later the need for commodities will kick in and override the fears permeating the global markets at this time. As far as the near term, many are starting to believe the optimism was highly exaggerated, and things will take longer to recover than thought.

In 2008 the Bovespa went off the cliff by 41 percent, but had a brief surge since the beginning of 2009.

Vale, Rio Tinto Group, Gerdau and Petrobras, among many others, all participated in the big decline today.

Raw materials and oil make up 54 percent of the MSCI Brazil Index.

When it comes down to it, investors don't believe countries are anywhere near ready to invest heavily in commodities, so they're pulling back until they are convinced to the contrary. That'll take some time.