The Bovespa (IBOV) index dropped the most among major emerging-market stock benchmarks as falling commodity prices pushed Brazilian producers lower after the International Monetary Fund cut its forecast for global growth.
OGX Petroleo & Gas Participacoes SA (OGXP3) added to the biggest plunge among the Bovespa’s members this year after the oil company said output at offshore wells dropped 26 percent in March. Pulp producer Suzano Papel & Celulose SA sank the most since June. Mining company MMX Mineracao & Metalicos SA (MMXM3) followed metals lower, while state-run oil producer Petroleo Brasileiro SA slumped as crude fell to a four-month low.
Brazil’s benchmark equity gauge sank 2.1 percent to 52,881.96 at the close of trading in Sao Paulo. Sixty-one of the 69 stocks on the measure declined. The real weakened 0.7 percent to 2.0006 per dollar. The Bloomberg Base Metals 3-Month Price Commodity Index slumped 2.8 percent. Commodities producers account for about 41 percent of the Bovespa’s weighting.
“Economic data around the world have been coming in weak lately, and there’s a strong commodities sell-off, which is spilling over to equities,” Gustavo Mendonca, who helps manage 1 billion reais as an economist at Saga Capital, said in a telephone interview from Rio de Janeiro. “Since Brazil is a big commodities exporter, it’s only natural that markets here suffer.”
The global economy will expand 3.3 percent this year, below January’s 3.5 percent forecast, the IMF said yesterday. The lender also cut its estimates for expansion in Brazil and China, the South American country’s biggest trading partner. Growth in Latin America might slow as commodities drop, the fund’s Western Hemisphere Director Alejandro Werner said in Lima yesterday.
OGX dropped 11 percent to 1.25 reais, while MMX sank 9.5 percent to 1.81 reais. Suzano fell 5.5 percent to 7.25 reais, the biggest slump since June 28. Petrobras, as Petroleo Brasileiro is known, tumbled 3 percent to 17.17 reais, the lowest since March 5.
Some companies linked to domestic demand, including cosmetics maker Natura Cosmeticos SA (NATU3), rallied as traders pared bets for higher borrowing costs in Brazil amid speculation that slower economic growth will curb inflation, allowing policy makers to moderate any increases in the benchmark lending rate. The central bank, which concludes a two-day monetary policy meeting today, has held the Selic rate at a record low 7.25 percent since October.
Natura gained 0.9 percent to 48.55 reais.
The Bovespa has retreated 16 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index (MXBRIC) of shares in Brazil, Russia, India and China has lost 10 percent over the same period.
Brazil’s benchmark equity gauge trades at 10.8 times analysts’ earnings estimates for the next four quarters, compared with 10.3 for the MSCI Emerging Markets Index (MXEF) of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 16.4 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.5 billion reais this year through April 15, according to data compiled by the exchange.
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