The Ibovespa dropped as economists covering Brazil cut their projections for growth and increased estimates for the benchmark interest rate, dimming the outlook for company earnings.
JBS SA (JBSS3) tumbled the most in six months after the world’s largest beef producer agreed to buy meat-processing plants in Brazil from Marfrig Alimentos SA. (MRFG3) Itau Unibanco Holding SA led lenders lower after Standard & Poor’s last week revised its credit outlook to negative.
The Ibovespa dropped 0.7 percent to 51,270.69 at 10:46 a.m. in Sao Paulo, extending a two-day decline to 3 percent. Forty-nine of 71 stocks fell on the gauge. The real weakened 1 percent to 2.1530 reais.
“Investors and economists are pessimistic about Brazil now, and we don’t see any news or reason for it to be different,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “Companies should suffer from this scenario of low growth and rising interest rates.”
Analysts reduced their projections for economic growth to 2.53 percent in 2013 from 2.77 percent while raising estimates for the country’s year-end benchmark interest rate to 8.75 percent from 8.50 percent, according to a weekly survey by the central bank posted today on its website.
JBS lost as much as 6.3 percent to 6.63 reais. Marfrig soared as much as 9.4 percent to 8.15 reais. A close at that level would be the highest since April 1. Itau fell 0.3 percent to 31.17 reais.
The Ibovespa (IBOV) has slumped 19 percent from this year’s peak 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 of shares in Brazil, Russia, India and China has dropped 13 percent over the same period.
Brazil’s benchmark equity gauge trades at 11.2 times analysts’ earnings estimates for the next four quarters, compared with a 10.5 multiple for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 8 billion reais on June 7, compared with a daily average of 7.71 billion reais this year, according to data compiled by the exchange.
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