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Ibovespa Futures Fluctuate on Rate Outlook, Citigroup Reduction

Ibovespa futures fluctuated between gains and losses after JPMorgan Chase & Co. cut its forecast for interest rate increases and Citigroup Inc. lowered its recommendation on Brazilian stocks to the equivalent of sell.

Multiplus SA (MPLU3), the frequent-flier unit of Latam Airlines Group SA (LFL)’s Brazil subsidiary, may move after naming Ronald Domingues chief financial officer, replacing Sandoval Martins Pereira. Arezzo Industria & Comercio SA may be active after Banco Itau BBA SA recommended buying the footwear maker’s shares.

Ibovespa futures contracts expiring in August rose 0.1 percent to 44,895 at 9:42 a.m. in Sao Paulo after sinking as much as 0.1 percent. The real weakened 0.1 percent to 2.2543 per dollar. Brazilian policy makers meet this week after boosting the benchmark lending rate 0.75 percentage point this year from a record-low 7.25 percent in a bid to tame inflation.

“Signs that the economic activity is weakening faster than expected by authorities” should spur the central bank to lift the benchmark Selic rate by 0.5 percentage point, down from a previous forecast of 0.75 percentage point, JPMorgan’s analysts including Fabio Akira wrote in a note to clients.

The Ibovespa has slumped 26 percent this year, the second-worst performance among 94 stock benchmarks tracked by Bloomberg. The real’s 8.9 percent drop this year and worse-than-forecast economic data will probably prevent the index from rebounding in the short term, according to Citigroup.

“We expect weak performance from the Brazilian market in the next few months,” Citigroup’s Stephen Graham wrote in a research note to clients.

Brazil’s equity gauge trades at 11.3 times analysts’ earnings estimates for the next four quarters, compared with 9.7 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume for stocks in Sao Paulo was 7.76 billion reais on July 5, compared with a daily average of 7.88 billion reais this year through July 4, according to data compiled by the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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