The Bovespa stock index fell the most in over two months after Standard & Poor’s Ratings Service put a “negative” outlook on its AAA credit rating for the U.S., Brazil’s second-biggest trading partner.
OGX Petroleo & Gas Participacoes SA, the oil producer controlled by Brazilian billionaire Eike Batista, plunged after its reserve report was called “disappointing” by Bank of America Corp. and Banco Santander SA. Homebuilder Gafisa SA led declines for companies that depend on credit growth, as traders raised bets for higher borrowing costs in Brazil.
The Bovespa dropped 1.9 percent to 65,415.49 at the close of Sao Paulo trading at 4:15 p.m. New York time. That was the biggest one-day decline since Feb. 9. Thirty-nine stocks on the index declined, 28 gained and 2 were unchanged. The real weakened 0.8 percent to 1.5893 per U.S. dollar.
“Standard & Poor’s decision about the U.S. rating joined OGX’s plunge here in Brazil and brought the stock market down,” Alvaro Bandeira, director of Rio de Janeiro-based brokerage Ativa Corretora, said in a telephone interview. “There was also China’s increase in banks’ reserve requirements, and speculation on Greece’s possible default. There is no good news whatsoever today.”
Standard & Poor’s said that more than two years after the beginning of the financial crisis, U.S. policymakers haven’t agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures.
China increased the amount of money banks must hold in reserve in an effort to lock up cash and cool inflation, and central bank Governor Zhou Xiaochuan said monetary tightening will continue for “some time.”
Greece said it has no plans to restructure its debt. “Restructuring is not an issue we’re discussing,” Greek Finance Minister George Papaconstantinou said in an April 16 interview in Washington.
OGX plunged 17.3 percent to 16.26 reais, the most since September 2008, after it reported 10.8 billion barrels of total crude and natural-gas reserves, according to a regulatory filing April 15.
“Though the 10.8 billion barrels headline ‘total potential resources’ estimate did not disappoint, a closer look at the underlying data suggests that this number is significantly overstated,” Bank of America analysts Frank McGann and Conrado Vegner wrote in a note to clients.
The report spurred Banco Santander to cut OGX to “hold” from “buy.”
“The overall report was disappointing,” analysts Christian Audi and Vicente Falanga Neto wrote in a note to clients.
The yield on interest-rate futures contracts due in January 2013 rose 4 basis points, or 0.04 percentage point, to 12.68 percent. The yield on the contracts maturing in January 2017 rose 3 basis points to 12.57 percent.
Economists covering the Brazilian economy raised their forecast for the benchmark interest rate at the end of 2012 to 11.75 percent, up from a week-earlier forecast of 11.5 percent, according to an April 15 central bank survey of about 100 economists published today. They also held their forecast for the so-called Selic rate at 12.25 percent by the end of this year.
Inflation in the next 12 months will be 5.42 percent, up from a 5.41 percent estimate a week ago, according to the survey. Economists also raised their forecast for this year’s inflation to 6.29 percent, from 6.26 percent a week-earlier, the survey showed.
Gafisa slid 1.7 percent to 9.78 reais.
CPFL Energia SA advanced 3.8 percent to 47.17 reais after O Estado de S.Paulo reported that the country’s largest private-sector power distributor is in talks to buy Empresa de Investimento em Energias Renovaveis SA, a Brazilian renewable energy company that operates 18 small hydroelectric plants and 11 wind parks. The newspaper didn’t say where it got the information.
Investments in Energias Renovaveis will be assessed at an opportune moment and, at this point, talks are not conclusive, CPFL said in a filing today.
Duratex SA, the Brazilian producer of wood panels and bathroom fixtures, rose 1.7 percent to 16.52 reais. The company plans to invest 1.2 billion reais in two wood panel plants in Brazil in the next five years, according to a regulatory filing.
Spanish casino operator Codere SA is studying plans to list shares of the company in Brazil, Mexico or the U.S., Madrid- based newspaper Expansion reported, citing Chief Executive Officer Jose Antonio Martinez Sampedro.
The Bovespa is down 5.6 percent this year as homebuilders and banks declined on concern inflation will limit growth, overshadowing a rally in telecom shares.
The index trades at 10.4 times analysts’ earnings estimates, according to weekly data compiled by Bloomberg. That compares to a ratio of 14.2 for the Shanghai Composite Index, 7.1 for Russia’s Micex, and 15.1 for India’s Sensex.
Investors pulled 3.3 billion reais from Latin America’s biggest equity market this year through April 13, data from the Sao Paulo exchange show.