The Bovespa index posted its longest losing streak since October as financial stocks fell amid speculation that delayed increases in benchmark borrowing costs will keep them from raising their own rates to improve profits.
Itau Unibanco Holding SA and Banco Bradesco SA, Brazil’s largest lenders, fell the most among banks. Oil producer OGX Petroleo & Gas Participacoes SA contributed most to the benchmark’s decline. Braskem SA, Latin America’s largest petrochemicals producer, was the best performer on the gauge after Credit Suisse Group AG raised its recommendation to the equivalent of buy.
The Bovespa fell for a fifth day, dropping 0.5 percent to 57,314.40 at the close of trading in Sao Paulo. Forty-three stocks declined on the measure while 24 rose. The real strengthened 0.4 percent to 1.9557 per dollar. The Bloomberg Base Metals 3-Month Price Commodity Index lost 0.9 percent.
“Banks rose quite a bit last week on signs that policy makers could raise interest rates still in the first half of the year, but now those bets faded and shares gave back some of the gains,” Fausto Gouveia, who helps manage 380 million reais at Legan Administracao de Recursos, said by phone from Sao Paulo.
While rising rates often hurt banks by crimping growth and triggering defaults, investors had been bidding up their stocks as a bet that increases would help a financial industry that has been pressured by the government to cut borrowing costs and shrink profit margins. Central bank rate increases would make it easier for banks to begin lifting their own rates and recover margins, according to Banco BTG Pactual SA.
Retail sales dropped 0.5 percent in December from November, the national statistics agency said today. The median forecast of 31 analysts surveyed by Bloomberg was for an increase of 0.8 percent.
Bradesco lost 2.1 percent to 36.16 reais. Itau fell 1.9 percent to 34.86 reais. The MSCI Brazil/Financials index was the worst performer among 10 industry groups, dropping 1 percent.
Suzano Papel & Celulose SA, Latin America’s second-largest pulp maker, sank 4 percent to 6.43 reais, following commodities lower.
Braskem rallied 7.1 percent to 14.88 reais, the steepest gain in six months.
The Bovespa has dropped 9.5 percent from this year’s high on Jan. 3 amid concern that accelerating inflation may curb Brazil’s economic recovery and that the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has declined 2 percent in the same period.
Brazil’s benchmark equity measure trades at 10.8 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 6.95 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.45 billion reais this year through Feb. 15, according to data compiled by the exchange.
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