Ibovespa Drops as Fed Speculation Dims Brazilian Stock Outlook

The Ibovespa fell the most in three weeks as speculation mounted that the Federal Reserve will soon reduce a U.S. stimulus program that has helped buoy demand for emerging-market assets including Brazilian stocks.

Real estate company BR Properties SA (BRPR3) sank to a four-week low after posting second-quarter earnings that missed analysts’ estimates. Suzano Papel & Celulose SA led losses by raw-material producers as commodities dropped.

The Ibovespa declined 1.9 percent to 47,537 at 11:36 a.m. in Sao Paulo with 66 stocks lower and four higher. The real climbed 0.4 percent to 2.2963 per dollar. U.S. stocks retreated as investors awaited an address by Fed Bank of Chicago President Charles Evans for indications of the central bank’s policy.

“What we see in the U.S. is signs that the economy is picking up, which could mean that the Fed will soon start cutting back stimulus,” Fernando Goes, an analyst at Sao Paulo-based brokerage Clear Corretora, said in a telephone interview. “A stronger U.S. economy should be good news, but for Brazil, less liquidity in the world would only mean reduced flow to equities.”

Evans is speaking to reporters today and his remarks will be made public at 2 p.m. in Sao Paulo. The Standard & Poor’s 500 Index yesterday slipped 0.1 percent after Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said the central bank is closer to slowing its $85 billion in monthly bond buying.

BR Properties, Suzano

BR Properties lost 3.6 percent to 18.41 reais. The company posted adjusted net income of 49.2 million reais in the second quarter, which compares with an average estimate among analysts of 66.4 million reais, according to data compiled by Bloomberg. Fourteen of the 24 Ibovespa members that have already reported earnings have trailed forecasts, according to data compiled by Bloomberg.

Suzano sank 3.7 percent to 7.64 reais.

Retailer Guararapes Confeccoes SA (GUAR3), which owns the Riachuelo apparel chain in Brazil, rose 2 percent to 85.10 reais, its biggest one-day gain on a closing basis in two weeks, after posting earnings that beat analysts’ forecasts.

The Ibovespa slumped 21 percent this year through yesterday, wiping out $248 billion from the value of Brazilian stocks, according to data compiled by Bloomberg. The gauge trades at 11.8 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume in Sao Paulo was 4.61 billion reais yesterday, compared with a daily average of 7.61 billion reais this year through Aug. 2, 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: Brendan Walsh at bwalsh8@bloomberg.net

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