The Ibovespa posted a fourth consecutive weekly decline as faster-than-forecast inflation pushed Brazilian homebuilders lower on concern that policy makers will increase borrowing costs.
Oil companies Petroleo Brasileiro SA and OGX Petroleo & Gas Participacoes SA followed crude lower amid speculation that the Federal Reserve will start trimming its monthly bond purchases in September. Gafisa SA and Brookfield Incorporacoes SA were the worst performers on the BM&FBovespa Real Estate Index, which declined for the fifth time in six sessions.
The Ibovespa lost 2.4 percent to 47,056.04 at the close of trading in Sao Paulo, extending this week’s slump to 4.6 percent. Sixty of the 71 stocks on the measure declined today.
“Inflation will probably take some time to decelerate,” Marc Sauerman, who helps oversee 650 million reais at Curitiba, Brazil-based J. Malucelli Investimentos, said in a telephone interview. “The central bank may be led to keep interest rates at a higher level for longer, with unpleasant consequences for the economy and the markets.”
Consumer prices, as measured by the IPCA-15 price index, rose 0.38 percent in the month through mid-June, the national statistics agency said today. The median forecast of economists surveyed by Bloomberg was for an increase of 0.36 percent.
Gafisa fell 8.6 percent to 2.78 reais. Brookfield tumbled 6.6 percent to 1.42 reais.
Petrobras, as Petroleo Brasileiro is also known, retreated 3.3 percent to 16.46 reais, contributing the most to the Ibovespa’s decline. OGX slipped 5.7 percent to 82 centavos. West Texas Intermediate crude for August delivery dropped as much as 2.4 percent on the New York Mercantile Exchange.
The Fed will reduce its monthly bond purchases in September to $65 billion from $85 billion and end buying in June 2014, according to the plurality of estimates by economists surveyed by Bloomberg in June 19-20. Chairman Ben S. Bernanke on June 19 mapped out a timetable for ending one of the most aggressive easing strategies in Fed history.
“There’s no sign that the Ibovespa can rebound if global markets continue to do poorly,” Sauerman said.
Cia. Paranaense de Energia, the power utility serving Parana state in Brazil’s southern region, plunged 17 percent to 26.21 reais. The company gave in to the state governor’s demands that its suspend a rate increase, saying it won’t implement the adjustment as scheduled next week and plans to meet with shareholders and government officials to discuss it.
The suspension could be “a setback not only for Copel but also for other state-owned utilities because politicians in command may feel tempted to interfere and implement similar decisions,” Citigroup Inc. analysts Marcelo Britto and Kaique Vasconcellos wrote in a note to clients.
Phone company Oi SA fell 10 percent to 3.57 reais, its lowest since 1998, after saying Chief Financial Officer Alex Zornig and Chief Operating Officer James Meaney have left.
The Ibovespa slumped into a bear market last week after falling more than 20 percent from this year’s peak on Jan. 3, and has since extended those losses to 26 percent. Brazil’s benchmark equity gauge trades at 11.4 times analysts’ earnings estimates for the next four quarters, compared with 9.7 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
Foreign investors have pulled 5.55 billion reais from Latin America’s largest equity market this month through June 17, data from the exchange show. Trading volume for stocks in Sao Paulo was 10.44 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.86 billion reais this year through June 18, according to data compiled by the exchange.