The Ibovespa fell after a report showing Brazilian inflation was higher than forecast rekindled concern that policy makers will maintain the faster pace of interest rate increases established at their last meeting.
Gafisa SA led homebuilders lower as the BM&F Bovespa Real Estate Index fell for the first time in three days. Lojas Renner SA slid the most among retailers. OGX Petroleo & Gas Participacoes SA, the oil producer controlled by the billionaire Eike Batista, sank below 1 real after Fitch Ratings cut its credit ranking. Utility Eletropaulo Metropolitana SA rose to a one-week high in the best performance on the benchmark.
The Ibovespa declined 2.1 percent to 49,332.34 at the close of trading in Sao Paulo, extending its weekly drop to 4.4 percent. The real weakened 1.4 percent to 2.1516 per dollar. Prices as measured by the IGP-10 index climbed 0.63 percent in June, according to data released today by the Getulio Vargas Foundation. The median estimate among 22 analysts surveyed by Bloomberg was for a 0.45 percent increase.
“Inflation is really resistant, so the central bank should have to increase rates again, which is negative for the stock market and for Brazilian companies, which have already been struggling amid weak growth,” Pedro Galdi, chief analyst at the Sao Paulo-based brokerage SLW Corretora, said by phone.
The central bank raised the target lending rate by a half-percentage point to 8 percent at its last meeting, surprising most analysts who predicted a quarter-percentage point increase. Latin America’s largest economy expanded 0.6 percent in the first three months of 2013, below estimates of a 0.9 percent expansion.
Gafisa slid 7.3 percent to 3.32 reais while the real estate index retreated 0.6 percent. Renner fell 4.3 percent to 66.70 reais. Eletropaulo gained 9.3 percent to 6.72 reais.
OGX sank 7.6 percent to 0.97 reais. Fitch cut the oil producer’s credit rating to CCC from B-, citing “increased uncertainty about the willingness and ability” of Batista to honor the company’s $1 billion put option.
The Ibovespa plunged into a bear market this week after falling more than 20 percent from its Jan. 3 peak on concern accelerating inflation is stunting Brazil’s growth and as global markets decline. The gauge’s 90-day volatility, a measure of price swings, rose to a six-month high of 19.7 today, according to data compiled by Bloomberg.
“This has been a hard year for the Brazilian stock market,” Mario Mariante, chief analyst at the brokerage firm Planner, said by phone from Sao Paulo. “Investors are very cautious, keeping distance from risk, waiting for solid signs of improvement in the economy. Until there’s some good news we’re going to continue to see a lot of volatility.”
Brazil’s benchmark equity gauge trades at 11.8 times analysts’ earnings estimates for the next four quarters, compared with a multiple of 10.2 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
Trading volume for stocks in Sao Paulo was 8.5 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.9 billion reais this year through June 13, according to data compiled by the exchange.