The Bovespa stock index declined for a second day as traders raised bets for higher borrowing costs while oil prices dropped, dimming the outlook for producers.
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, followed crude prices lower. Homebuilder MRV Engenharia & Participacoes SA led declines by companies that depend on credit growth.
The Bovespa index fell 0.8 percent to 62,367.36 at the close of Sao Paulo trading at 4:15 p.m. New York time. Forty-two stocks retreated on the index, while 26 gained. The real weakened 0.4 percent to 1.6160 per U.S. dollar.
Brazil’s benchmark equity gauge gained as much as 1.2 percent earlier today, as the cheapest valuations in more than two years lured investors. It fell the most in a week yesterday on increased bets for higher interest rates in Brazil and as European officials clashed over a restructuring of Greece’s debt.
“Investors are still worried about the interest-rate outlook,” said Dany Rappaport, who helps manage about 160 million reais ($99 million) at Investport in Sao Paulo. “Companies have good fundamentals, but stocks won’t have sustainable gains until there are signs that inflation is really decelerating.”
Yields on Brazilian interest-rate futures contracts climbed as central bank President Alexandre Tombini said policy makers have “work ahead” to bring inflation down to their target range next year amid rising consumer demand.
Yields on the contract due in January 2013, the most traded today in Sao Paulo, rose three basis points, or 0.03 percentage point, to 12.53 percent.
MRV slumped 5.8 percent to 13.40 reais, the most since March 24. The BM&FBovespa Real Estate Index slid 1.8 percent to 913.18.
Crude oil prices fell after the index of U.S. leading indicators dropped for the first time in 10 months in April, and sales of existing U.S. homes declined, signaling fuel demand may weaken.
Petrobras, as Petroleo Brasileiro is known, fell 1.9 percent to 23.64 reais.
JBS SA, the world’s biggest beef producer, tumbled 3.5 percent to 5.29 reais. The stock was cut to “underperform” from “neutral” at Bank of America Corp. after saying it would convert debt into stock, giving Brazil’s development bank, BNDES, a 31 percent stake.
SLC Agricola SA, a Brazilian agriculture company, advanced 1.3 percent to 19.55 reais after it was raised to “buy” from “neutral” at Bank of America, which cited the valuation and outlook for “solid margins” in the next two quarters.
Vale SA, the world’s largest iron-ore producer, rose 1.5 percent to 43.46 reais after Goldman Sachs Group Inc. said the stock’s recent underperformance created an “unusually large discount” to its competitors.
The Bovespa dropped 10 percent this year on concern accelerating inflation will hurt economic growth.
Brazil’s benchmark equity index trades at 10.1 times analysts’ earnings estimates, the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 13.1 for the Shanghai Composite Index, 6.7 for Russia’s Micex and 14.6 for India’s Sensex.
Investors pulled 2.54 billion reais ($1.57 billion) from Latin America’s biggest equity market this year through May 11, data from the Sao Paulo exchange show.