Bovespa Index Drops as Eletrobras Plunges on Quarterly Earnings

The Bovespa (IBOV) index headed for a second weekly decline as utility Centrais Eletricas Brasileiras SA (ELET6) plunged after quarterly earnings trailed analysts’ estimates and as concern mounted that global growth is faltering.

Eletrobras, as the power company is known, tumbled to the lowest in more than eight years. Homebuilder PDG Realty SA Empreendimentos e Participacoes headed to a four-month low after canceling the release of new projects guidance for 2012.

The Bovespa slid 0.2 percent to 56,142.47 at 11:09 a.m. in Sao Paulo, pushing its weekly decline to 2.2 percent. The real weakened 0.2 percent to 2.0709 per U.S. dollar. Brazilian markets were closed yesterday for a holiday.

Eletrobras was the latest Brazilian company to miss earnings estimates. Fifty-eight percent of the 62 Bovespa members that have reported since September trailed projections, according to data compiled by Bloomberg. In the U.S., President Barack Obama is beginning negotiations today with Republicans in Congress to try to avert $607 billion in automatic tax increases and spending cuts scheduled to take effect in January.

“Many Brazilian companies reported disappointing earnings, so investors are discouraged to put more money into the Bovespa,” Sandro Fernandes, a trader at Belo Horizonte, Brazil- based brokerage Corval, said in a phone interview. “And a big concern for the markets all over the world today is the U.S. fiscal cliff. Everybody is anxious about how Obama’s talks with lawmakers will develop.”

Eletrobras declined 7.3 percent to 12.15 reais. PDG retreated 1.6 percent to 3.09 reais.

Bovespa Rebound

The Bovespa has climbed 7 percent from this year’s low on June 5 as central banks around the globe injected cash into their economies and Brazilian policy makers cut benchmark borrowing costs to a record low 7.25 percent. The index trades at 15.9 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.2 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.16 billion reais in stocks in Sao Paulo on Nov. 14, which compares with a daily average of 7.2 billion reais this year, according to data compiled by the exchange.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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