Ibovespa Falls as Brazil Inflation Outlook Pushes Gafisa Lower

The Ibovespa retreated from a one-week high as Gafisa SA (GFSA3) led homebuilders lower on concern that Brazilian policy makers will keep raising interest rates to control inflation.

Drug retailer Raia Drogasil SA was the worst performer on the MSCI Brazil/Consumer Staples Index, which snapped a two-day advance. Banco do Brasil SA led declines among banks. Cia. Siderurgica Nacional SA (CSNA3), the steelmaker known as CSN, rallied after Brazil approved anti-dumping duties on steel pipes imported from China for as long as six months.

Brazil’s benchmark stock index declined 0.5 percent to 51,596.55 at the close of trading in Sao Paulo, with 41 stocks lower and 30 higher. The real climbed 0.2 percent to 2.2144 per dollar at 5:24 p.m. local time. Wholesale, construction and consumer prices rose 1.19 percent in the month ended April 10, the Getulio Vargas Foundation reported, exceeding the median estimate of 1.10 percent from economists surveyed by Bloomberg.

“The outlook for inflation is worrisome as data continue to show prices increasing,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil SA, said by phone from Sao Paulo. “If numbers keep pointing up, the central bank will probably have to increase interest rates once more in May.”

The median estimate of a central bank survey of about 100 analysts published today indicated that consumer prices in Brazil will increase 6.47 percent this year, up from a forecast of 6.35 percent a week earlier. Policy makers, which target annual inflation at 4.5 percent, plus or minus two percentage points, have increased the benchmark Selic rate in nine straight meetings, from a record low 7.25 percent in 2013 to 11 percent.

Gafisa, Souza Cruz

Gafisa dropped 3.2 percent to 3.64 reais today. Raia Drogasil declined 2.1 percent to 18.60 reais. Banco do Brasil lost 1.5 percent to 23.47 reais.

Losses on the Ibovespa were limited as iron-ore producer Vale SA (VALE5) climbed 0.9 percent to 30.12 reais, following metals higher. The MSCI All-Country World index rose 0.3 percent after a report showed retail sales in the U.S. increased the most since 2012.

CSN gained 2 percent to 9.34 reais.

Brazil’s main equity index entered a bear market March 14 after falling 20 percent from its October high through that day. The gauge has since gained 15 percent as state-owned companies including Centrais Eletricas Brasileiras SA (ELET6) rebounded.

Trading volume of stocks in Sao Paulo today was 5.25 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.61 billion reais this year, according to data from the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Dennis Fitzgerald, Richard Richtmyer

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