The Bovespa posted the worst performance among major equity indexes in the Americas after Citigroup Inc. lowered its forecast for Brazil’s benchmark gauge, citing “anemic” economic growth and faster inflation.
Vale SA, the world’s largest iron-ore producer, dropped as metals fell and after Brazil’s Supreme Court postponed a tax ruling that could benefit the company, Bank of America Corp. said in a report. OGX Petroleo & Gas Participacoes SA, the oil producer controlled by the billionaire Eike Batista, slumped the most on the gauge after Standard & Poor’s cut its credit rating one level to B-, or six steps below investment grade.
The Bovespa fell 1.6 percent to 54,648.15 at the close of trading in Sao Paulo, the lowest since July 26. The decline extended this year’s drop to 10 percent. Four stocks dropped for every one that gained on the measure today.
Citigroup lowered its year-end forecast for the Bovespa to 65,000 from 70,000, according to a research note sent to clients.
“The macro framework is indecisive and inflation too high; growth is anemic,” Stephen Graham, a Sao Paulo-based analyst, and Nicolas Riva, based in New York, wrote in the note. “Business reality on the ground is better than the prevailing market mood, but the uphill struggle to change the mood keeps getting steeper.”
Brazil’s gross domestic product expanded 0.9 percent last year, the slowest pace among major developing nations, according to data compiled by Bloomberg. Inflation probably quickened to 6.60 percent in the year ending in March, topping the 6.5 percent upper limit of the central bank’s target, economists’ forecasts show.
The Bovespa has retreated 14 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.
“It’s not just the stocks on the Bovespa index, the whole stock market is now under pressure given some concerns investors have about Brazil,” Marc Sauerman, who helps oversee 650 million reais at Curitiba, Brazil-based J Malucelli Investimentos, said in a telephone interview.
Vale fell 4 percent to 32.36 reais, the biggest one-day decline since July 24. OGX slumped 11 percent to 1.98 reais. MMX Mineracao & Metalicos SA, Batista’s mining company, tumbled 7.3 percent to 1.90 reais.
Airline Gol Linhas Aereas Inteligentes SA dropped 3.6 percent to 10.86 reais after Fitch Ratings lowered its credit ranking two levels to B-. Clothing retailer Cia. Hering climbed 1.6 percent to 37.13 reais after Banco Santander raised its recommendation to buy.
The real gained 0.5 percent to 2.0150 per dollar. The Brazilian currency strengthened amid speculation a $6 billion initial public offering for the insurance unit of Banco do Brasil SA, Latin America’s biggest lender by assets, will bring more dollars into the country, according to Carlos Kawall, the chief economist at Banco Safra SA in Sao Paulo.
The Bovespa trades at 10.9 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks in Sao Paulo was 7.1 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.46 billion reais this year through April 2, according to data compiled by the exchange.