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Bovespa Snaps Three-Day Gain as Hering Drops on Inflation View

April 1 (Bloomberg) -- The Bovespa index snapped a three-day gain as retailer Cia. Hering led consumer stocks lower after economists covering Brazil raised their 2014 inflation forecasts.

Petroleo Brasileiro SA, the state-controlled oil producer known as Petrobras, declined as crude slid from a six-week high and Itau BBA said February data point to a decline in crude production this year. Steelmaker Cia. Siderurgica Nacional SA jumped after fourth-quarter profit beat analysts’ estimates.

The Bovespa dropped 0.8 percent to 55,902.18 at the close of trading in Sao Paulo. Forty-eight stocks retreated on the benchmark while 19 advanced. The real was little changed at 2.0208 per dollar as the Standard & Poor’s GSCI index of 24 raw materials lost 0.3 percent. Economists forecast 2014 inflation at 5.68 percent, up from a 5.60 percent projection in the previous week, according to central bank survey released today.

“Things are still complicated, and investors are still skeptical about what will happen in the short term,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores SA in Sao Paulo, said by phone. “Inflation expectations are still high, far from the target’s midpoint. That doesn’t help the market.”

Brazil’s HSBC Purchasing Managers’ Index for the manufacturing sector fell to 51.8 in March compared with 52.5 in February, Markit Economics said today on its website. U.S. manufacturing grew less than forecast in March, according to the Institute for Supply Management’s factory index.

Petrobras dropped 1.7 percent to 18.04 reais as crude fell in New York. Miner Vale SA tumbled 2.5 percent to 32.41 reais.

PDG, Natura

Hering slid 3.1 percent to 34.98 reais, the lowest since Jan. 4. Homebuilder PDG Realty SA Empreendimentos & Participacoes declined 1.9 percent to 3.05 reais. Cosmetics company Natura SA, which got 88 percent of its third-quarter sales from Brazil, slumped 2.2 percent to 48.30 reais.

“We had some weak data in the U.S. today, so we’re reacting to the external mood,” Leonardo Brito, an equity analyst at hedge fund Teorica Investimentos, said in a phone interview from Rio de Janeiro. “Here, inflation has been above the midpoint for a while, with projections of even breaching the high point, and the central bank hasn’t done anything. That creates uncertainty, and that weighs on stocks.”

The central bank said on March 28 inflationary pressures have spread, increasing the probability that annual price increases will breach the 6.5 percent upper limit of the target range for the first time in a decade. Inflation was 6.31 percent in February.

CSN Jumps

CSN, as Cia. Siderurgica is also known, gained 5.1 percent to 9.60 reais. Adjusted net income was 332 million reais ($164 million) in the fourth quarter, according to data compiled by Bloomberg after the company released results on March 28. That compares with an average estimate of 183 million reais among seven analysts surveyed by Bloomberg.

The steelmaker’s executives said in a conference call today that they see steel prices rising further in Brazil this year after a 5 percent increase in the first quarter. David Salama, CSN’s head of investor relations, also said on today’s call that “up until now the company hasn’t made a binding offer” for ThyssenKrupp’s CSA mill.

The Bovespa has retreated 12 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 6.8 percent over the same period.

Trading volume for stocks in Sao Paulo was 5.02 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.56 billion reais this year through March 26, according to data compiled by the exchange.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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