Ibovespa Declines After Brazil Primary Surplus Data

Most Brazilian stocks fell after the government posted a budget surplus that was smaller than economists forecast, fueling concern that growth in Latin America’s biggest economy is faltering.

B2W Cia. Digital led declines in retailers. Petroleo Brasileiro SA, the state-run oil producer, had its longest streak of losses since 2009 before a board meeting at which a proposed new fuel pricing formula will be discussed. Iron-ore producer Vale SA (VALE5) rose after agreeing to pay 22.3 billion reais to settle a tax dispute with Brazil over profits at its foreign units.

The Ibovespa equity benchmark was little changed at 51,846.83 at the close of trading in Sao Paulo with 38 of its 72 member stocks lower. The real rose 0.6 percent to 2.3164 per U.S. dollar at 5:27 p.m. local time. Brazilian stocks pared earlier gains after the Treasury said the government’s primary surplus was 5.4 billion reais in October, trailing the median estimate among analysts for an 8 billion-real surplus.

“The primary surplus didn’t please the market,” Ari Santos, an equity trading manager at brokerage H. Commcor in Sao Paulo, said in a telephone interview. “It could accelerate a more negative outlook from the rating agencies.”

Standard & Poor’s in June placed Brazil’s BBB credit rating under review for a possible reduction, citing weak growth. Moody’s Investors Service last month followed S&P in lowering its outlook on Brazil to stable from positive. The two ratings companies highlighted the increase in public lending.

B2W sank 4.1 percent to 14.20 reais. Petrobras, as the oil producer is known, fell 1.6 percent to 18.66 reais.

Selic Rate

Earlier, the index rose as much as 1.2 percent as homebuilders climbed after Brazil’s central bank signaled that the cycle of interest-rate increases that began in April may be coming to an end.

In a statement accompanying yesterday’s decision to lift the benchmark lending rate for a sixth time this year, policy makers omitted language used in previous communiques to signal that additional increases were needed to curb inflation.

“The central bank may be worried about not going too far with the rate increases so they don’t hurt the recovery,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil SA in Sao Paulo, said in a phone interview. “There’s a positive impact on equities.”

BR Malls Participacoes SA gained 2.4 percent to 19.30 reais. The BM&FBovespa Real Estate Index rose for the first time in four days.

Vale Settlement

Vale added 2.7 percent to 32.30 reais. The company agreed to pay 5.97 billion reais at the end of this month and 16.4 billion reais in 179 monthly installments, plus interest, after its board decided to join a settlement program offered by the government, according to a regulatory filing late yesterday.

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 25 percent in dollar terms this year, compared with a decline of 4.1 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo today was 4.52 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 7.54 billion reais this year through yesterday, according to data available from the exchange.

To contact the reporters on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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

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