The Bovespa index dropped the most in three weeks as Petroleo Brasileiro SA slid after Valor Economico reported the state-controlled company is losing money by offering natural gas below cost.
Petrobras contributed the most to the benchmark’s decline. OGX Petroleo & Gas Participacoes SA, billionaire Eike Batista’s oil company, followed crude lower. Consumer-products maker Hypermarcas SA rallied after a report that showed inflation was slower than forecast in December spurred speculation that the central bank will hold borrowing costs at record lows.
The Bovespa retreated 0.9 percent to 60,415.95 at the close of trading in Sao Paulo, its biggest decline since Dec. 4. Forty-three stocks slid while 24 rose. The real strengthened 0.3 percent to 2.0434 per dollar.
“Petrobras has suffered for a while from the government’s pressure to hold its prices at levels that don’t cover costs, and this news report today is more evidence of this problem,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview.
Petrobras slumped 3.2 percent to 19.41 reais. The company’s press office declined to comment on Valor’s report when contacted by Bloomberg News.
OGX lost 1.4 percent to 4.32 reais as crude fell in New York from the highest level in two months after U.S. Senate Majority Leader Harry Reid said lawmakers and President Barack Obama probably won’t reach an agreement to avoid automatic tax increases and spending cuts set to take effect next year.
Hypermarcas gained 1.9 percent to 16.57 reais, the highest closing level since Oct. 23. Brazil’s IGP-M index of wholesale, construction and consumer prices climbed 0.68 percent in December, the Getulio Vargas Foundation reported. The median forecast of 30 analysts surveyed by Bloomberg was for a 0.76 percent increase. Prices rose 7.82 percent from a year earlier.
Brazil’s policy makers left the target lending rate at a record low 7.25 percent last month following 10 straight reductions to support the economy.
The Bovespa has climbed 15 percent from this year’s low in June as stimulus from central banks around the world eased concern about an economic slowdown while record low benchmark lending rates have pushed some investors to move into stocks from fixed income.
Brazil’s benchmark equity index trades at 11.4 times analysts’ earnings estimates for the next four quarters, compared with 11 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 4.77 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.27 billion reais this year through Dec. 26, according to data compiled by the exchange.