Ibovespa Futures Fall as Traders Raise Brazil Rate-Increase Bets

Ibovespa futures dropped, following the equity gauge’s first decline in three days, after traders raised bets on higher borrowing costs in Brazil as policy makers converged for a two-day meeting.

BM&FBovespa SA (BVMF3) may move after Deutsche Bank AG cut its recommendation on the exchange operator to hold. Cia. de Transmissao de Energia Eletrica Paulista, an electricity distributor, may be active after saying Chief Executive Officer Cesar Augusto Ramirez Rojas will step down in October.

Ibovespa futures contracts expiring in October fell 1.4 percent to 50,140 at 9:24 a.m. in Sao Paulo. The real weakened 1.5 percent to 2.4150 per dollar. Swap rates on contracts due in January 2015 rose 10 basis points, or 0.1 percentage point, to 10.44 percent. Brazil’s central bank has increased the target lending rate known as the Selic by 1.25 percentage points in 2013 from a record low 7.25 percent to control inflation.

“The tightening cycle could be more prolonged than our current Selic forecast of 9.25 percent by the end of this year,” JPMorgan Chase & Co.’s economists including Fabio Akira wrote in a research note to clients, citing concern that a weaker real will fuel inflation.

The Ibovespa has gained 14 percent from this year’s low on July 3 as higher commodities prices and a weaker real boosted raw-material exporters. Brazil’s benchmark gauge climbed 8.3 percent in dollar terms in this period, which compares with an advance of 0.9 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 5.21 billion reais yesterday, compared with a daily average of 7.76 billion reais this year through Aug. 23, 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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