Bovespa Fluctuates as Inflation Bolsters View Rates Will Rise

The Bovespa (IBOV) index swung between gains and losses as inflation accelerated more than forecast, bolstering speculation the central bank will increase borrowing costs from record lows and reduce support for the economy.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- biggest steelmaker by market value, fell to its lowest level in two months.

The Bovespa advanced less than 0.1 percent to 61,705.46 at 11:16 a.m. in Sao Paulo. The real strengthened 0.1 percent to 2.0402 per dollar. The IPCA-15 consumer price index rose 0.88 percent in the month through mid-January, compared with an increase of 0.69 percent in the prior period, the national statistics agency reported today. The median forecast of 38 economists surveyed by Bloomberg was for a 0.82 percent advance.

“Investors are now more cautious because the monetary authority may increase interest rates,” Lucas Brendler, who helps manage about 6 billion reais at Banco Geracao Futuro de Investimentos, said by phone from Porto Alegre.

Usiminas dropped 2.1 percent to 11.06 reais, the lowest level on a closing basis since Nov. 16.

The central bank held the benchmark interest rate at 7.25 percent for a second straight meeting on Jan. 16, saying the domestic recovery was “less intense” than expected and the balance of risks for inflation worsened in the short term.

Bull Market

The Bovespa entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its advance to 18 percent.

Brazil’s benchmark equity gauge trades at 11.6 times analysts’ earnings estimates for the next four quarters, compared with 11 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume of stocks in Sao Paulo yesterday was 6.29 billion reais ($3.1 billion), compared with a daily average of 7.25 billion reais in 2012, 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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