The Ibovespa plunged the most since September 2011 as Brazil’s industrial production shrank more than analysts forecast and Nomura Holdings Inc. said the economy may sink into recession.
OGX Petroleo & Gas Participacoes SA (OGXP3), the oil company controlled by billionaire Eike Batista, extended a four-day plunge to 49 percent after Morgan Stanley cut the stock to the equivalent of sell. Rossi Residencial SA (RSID3) plunged to a record low as homebuilders declined.
The Ibovespa tumbled 4 percent to 45,325.99 at 3:57 p.m. in Sao Paulo. It was the steepest drop among the world’s 20 biggest benchmarks tracked by Bloomberg. Brazil may enter a recession in the last quarter of 2013 as tighter monetary policy in the U.S. curbs capital flows to Latin America, Nomura’s analysts wrote in a note to clients today. The real weakened 1 percent to 2.2507 per dollar, the most among 24 emerging currencies.
“Everyone seems to be trying to stay as far as possible from anything Brazilian, from equities to currency,” Fausto Gouveia, who helps manage 380 million reais at Sao Paulo-based Legan Administracao de Recursos, said by phone from Sao Paulo.
The Ibovespa slumped into a bear market last month and is down 26 percent this year, the worst performer among 94 global stock gauges, as concern mounts that surging inflation is squelching Brazil’s economic expansion.
A central bank survey yesterday showed that economists’ median estimate for gross domestic product this year fell for an eighth straight week to 2.4 percent. Industrial production contracted 2 percent in May from April after rising 1.9 percent in April, the national statistics agency said today in Rio de Janeiro. Economists surveyed by Bloomberg had expected output to shrink 1.1 percent in May.
“Industrial production figures were very bad,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said by phone from Sao Paulo. “And on top of all that we have all Eike’s companies plunging, as more and more people think they’ll go under.”
Rousseff’s administration is trying to revive growth in Latin America’s biggest economy that slowed for two straight years to 0.9 percent last year from 7.6 percent in 2010.
Inflation in mid-June climbed to 6.67 percent on an annual basis, prompting monetary policy makers to boost the benchmark interest rate by 0.75 percentage point this year to 8 percent. The government has taken additional steps to curb inflation by intervening in industries ranging from energy to utilities.
A rise in bus fares last month sparked the biggest street demonstrations in two decades, leaving at least six dead and hundreds injured. The fare increases were quickly reversed.
The selloff in Brazilian stocks was further fueled by mounting speculation that the U.S. Federal Reserve later this year will taper its $85 billion in monthly bond buying that has kept interest rates close to zero and pushed investors into higher-yielding emerging markets.
OGX slumped 16 percent to 47 centavos. The shares fell 30 percent yesterday after the producer said it may shut its only producing wells after a technical review and scrapped three other offshore projects.
Rossi retreated 6 percent to 2.67 reais. All but three stocks on the 71-member Ibovespa dropped today.
Brazil’s benchmark equity gauge trades at 11.1 times analysts’ earnings estimates for the next four quarters, compared with 9.9 for the MSCI Emerging Markets Index of 21 developing nations’ equities. Trading volume for stocks in Sao Paulo was 8.97 billion reais on June 28, compared with a daily average of 7.93 billion reais this year through June 25, according to data compiled by the exchange.
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