Ibovespa Tumbles to Week Low as Commodities Sink on U.S Deadlock

The Ibovespa sank to the lowest in a week as Brazilian exporters including iron-ore producer Vale SA followed commodities down on concern a budget impasse in the U.S. may squelch global economic growth.

Telefonica Brasil SA declined to a one-month low after Credit Suisse Group AG lowered its recommendation on the phone company to the equivalent of hold. OGX Petroleo e Gas Participacoes SA was the worst performer on the Ibovespa after two people with direct knowledge of the matter who asked not to be identified said Eike Batista’s oil producer is considering filing for bankruptcy protection within a month.

Brazil’s main equity gauge lost 0.7 percent to 52,485.26 at 10:34 a.m. in Sao Paulo, with 55 stocks lower and 15 higher. The real gained 0.1 percent to 2.2094 per dollar. The Standard & Poor’s GSCI index of 24 raw materials retreated 0.9 percent. The MSCI All-Country World Index fell 0.9 percent to a two-week low.

“Investors are apprehensive about the risks the impasse in the U.S. brings to the global recovery,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil in Sao Paulo, said in a phone interview. “People are turning away from riskier assets such as equities. With global stocks falling, the Ibovespa follows.”

With the U.S. set to exhaust measures to avoid breaching its debt ceiling on Oct. 17, House of Representatives Speaker John Boehner said lawmakers won’t raise the limit without packaging it with other provisions. President Barack Obama’s administration has said it won’t negotiate with Republicans over funding the government or raising the debt ceiling.

An OGX bankruptcy filing would be carried out in Rio de Janeiro, where the company is based, said the two people familiar with the matter, asking not to be identified because discussions are private. Shares slid 4.4 percent to 22 centavos. OGX declined to comment in an e-mailed response to questions.

Vale fell 0.8 percent to 31.65 reais. Telefonica Brasil slipped 1 percent to 47.70 reais.

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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