Bovespa Falls as Petrobras Slumps on Fuel Price Disappointment

The Bovespa index tumbled to a seven-week low as Petroleo Brasileiro SA dropped the most in seven months on speculation a 6.6 percent increase in gasoline prices at refineries won’t be enough to boost profits.

Petrobras, as the state-controlled oil producer is known, contributed the most to the gauge’s slump. MPX Energia SA posted the steepest drop since November 2008, leading declines among companies controlled by the Brazilian billionaire Eike Batista. Gol Linhas Aereas Inteligentes SA fell on concern the government may try to force airlines to cap some fares.

The Bovespa fell 1.8 percent to 59,336.70 at the close of trading in Sao Paulo, the lowest since Dec. 13. Forty-six stocks sank on the measure while 22 advanced. The real weakened 0.1 percent to 1.9887 per U.S. dollar. Petrobras said in a regulatory filing that it was seeking to eliminate the discount between domestic and international prices eventually.

“The increase isn’t enough to eliminate the gap with international prices,” Gustavo Mendonca, an economist at Oren Investimentos, said by phone from Rio de Janeiro. “And it’s unlikely that the government will allow it to raise domestic prices again anytime soon.”

The higher fuel prices put “additional pressure on inflation, which is already running at a fast pace,” Mendonca said.

Brazil’s IGP-M index of wholesale, construction and consumer prices rose 0.34 percent in the month ended Jan. 20 after climbing 0.68 percent previously, the Getulio Vargas Foundation said today. Economists surveyed by Bloomberg had projected an increase of 0.32 percent.

Gol, Rossi

Gol slumped 4 percent to 14.40 reais. The stock earlier dropped as much as 7.8 percent as after Veja magazine reported that Brazil may try to force airlines to cap some fares. Shares pared losses after the government denied the report.

Homebuilder Rossi Residencial SA lost 2.3 percent to 4.19 reais.

Petrobras fell 4.8 percent to 18.20 reais, the biggest drop since June 25. The fuel price adjustment announced yesterday will reduce the price gap for gasoline to 11.8 percent and diesel to 12.2 percent, Banco Bradesco SA analysts led by Auro Rozenbaum wrote in a note distributed to clients yesterday.

Totvs SA, Latin America’s biggest maker of business-management software, tumbled 5.8 percent to 41.49 reais after posting adjusted net income of 66.9 million reais in the fourth quarter, missing the average estimate of 72.5 million reais, data compiled by Bloomberg show.

Bull Market

MPX fell 10.1 percent to 9.99 reais. OGX Petroleo & Gas Participacoes SA slumped 7.8 percent to 4.37 reais, the steepest drop on the Bovespa.

Brazil’s benchmark equity gauge entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its advance to 13 percent.

The Bovespa trades at 11 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 9.07 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.

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