Ibovespa Futures Drop as U.S. Budget Dispute Damps Risk Demand

Ibovespa futures fell, after the stock index sank yesterday to a two-week low, on concern that a political deadlock over the U.S. budget will curb global demand for riskier assets including Brazilian equities.

Banco Santander Brasil SA (SANB11) may move after saying it will pay out 6 billion reais ($2.7 billion) to shareholders under a capital restructuring. Lupatech SA (LUPA3), a provider of oil equipment and services, may be active after Vallourec SA (VK) said it agreed to buy one of its units for 21 million euros ($28.4 million).

Ibovespa futures contracts expiring in October declined 0.6 percent to 53,170 at 9:12 a.m. in Sao Paulo. The real weakened 0.6 percent to 2.2595 per dollar.

“Until there’s a solution to the budget issue in the U.S., investors will remain cautious, keeping Brazilian stocks from rising,” Fausto Gouveia, who helps manage 500 million reais at Legan Administracao de Recursos, said in a telephone interview from Sao Paulo.

A shutdown of the U.S. government would reduce fourth-quarter economic growth by as much as 1.4 percentage points depending on its length, according to economists.

The Ibovespa entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 19 percent in dollar terms this year, compared with a decline of 5.3 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo yesterday was 5.09 billion reais, compared with a daily average of 7.71 billion reais this year through Sept. 24, 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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