The Ibovespa dropped after minutes of the central bank’s most recent meeting showed policy makers expect slowing economic growth even as inflation remains close to the upper limit of the government’s target.
Lender Itau Unibanco Holding SA and brewer Ambev SA were among the biggest contributors to the gauge’s decline. Retailers Cia. Brasileira de Distribuicao and Via Varejo SA rallied after approving a plan to merge their e-commerce business with a unit of Casino Guichard-Perrachon SA.
The Ibovespa decreased 0.5 percent to 51,558.79 at the close of trading in Sao Paulo, with 44 stocks lower and 22 higher. The central bank signaled in the minutes of its May meeting published today that it will avoid further increases in borrowing costs, citing the slowing economy and the delayed effect of the one-year tightening cycle on inflation.
“When it comes to economic fundamentals, there’s nothing positive for equities,” Fausto Gouveia, who helps manage 500 million reais at Legan Administracao de Recursos in Sao Paulo, said by phone. “Refraining from boosting interest rates would be good news only if the central bank were doing so because inflation is low. Which is not the case.”
Brazil’s economy expanded 0.2 percent in the first quarter, half the pace of the revised figure recorded for the last three months of 2013, the national statistics agency said May 30. A report tomorrow is forecast to show consumer prices increased 6.29 percent in the 12 months through May, compared with the 4.5 percent midpoint of the official target range.
Ambev lost 0.8 percent to 16.08 reais. Itau fell 0.7 percent to 34.57 reais. Pao de Acucar, as Cia. de Distribuicao is also known, added 2.6 percent to 103.77 reais, and Via Varejo climbed 2 percent to 25.54 reais.
The Ibovespa gained 0.8 percent earlier today as emerging-market stocks rose as the European Central Bank’s actions to strengthen the economy boosted the outlook for emerging-market assets including Brazilian equities.
ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Iron-ore producer Vale SA slumped 0.3 percent to 25.73 reais. The company said nickel production at its plant in New Caledonia is set to resume within 10 days after it received government permission to restart operations.
The Ibovespa entered a bull market on May 7, surging 20 percent from this year’s low, as Petroleo Brasileiro SA rallied on speculation a change in government will reduce intervention in state-run companies. The index has since dropped 4.6 percent.
Trading volume of stocks in Sao Paulo today was 3.82 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.6 billion reais this year, according to data from the exchange.
To contact the reporter on this story: Ney Hayashi in Sao Paulo at firstname.lastname@example.org