The Ibovespa posted the worst weekly drop among major equity gauges as speculation that the Federal Reserve will pare monetary stimulus in the world’s biggest economy outweighed slower-than-forecast Brazilian inflation.
Banco Bradesco SA led a decline in financial shares as UBS AG said the bank is the most exposed to billionaire Eike Batista’s companies. Iron-ore producer Vale SA followed metals lower. Steelmaker Usinas Siderurgicas de Minas Gerais SA slumped as Finance Minister Guido Mantega said Brazil is considering reducing import taxes on basic materials.
The Ibovespa retreated 1.2 percent to 45,210.49 at the close of trading in Sao Paulo. The gauge dropped 4.7 percent this week, the most among the world’s 20 biggest benchmarks tracked by Bloomberg. The real weakened 0.2 percent to 2.2524 per dollar today. U.S. employers added more jobs than forecast last month, according to data released today in Washington.
“Tighter monetary policy in the U.S. will make Treasuries more attractive, which could hurt capital flows to other parts of the world, especially emerging markets,” Luis Gustavo Pereira, an analyst at Futura Corretora brokerage, said in a phone interview from Sao Paulo. The jobs report rekindled speculation that a stronger U.S. economy will spur the Fed to scale back monetary stimulus that has buoyed demand for emerging-market assets, he said.
Treasuries sank today, sending the 10-year yield to the highest since August 2011.
Bradesco slumped 3.4 percent to 26.13 reais, the lowest since June 2012. The bank is the most exposed to Batista’s companies, according to a UBS report dated today, “with a higher potential of earnings downside.” The MSCI Brazil/Financials index slipped 1.8 percent.
Bradesco’s press office declined to comment on the report when contacted by e-mail by Bloomberg News today.
Batista stepped down yesterday as chairman of MPX Energia SA as part of a capital increase agreement with partner E.ON SE. The billionaire plans to sell assets and renegotiate debt in his companies after losing about $30 billion in personal wealth since March 2012 following a series of missed targets and canceled projects.
In Brazil, consumer prices as measured by the IPCA index rose 0.26 percent in June from a month earlier, less than all of the forecasts of economists surveyed by Bloomberg, who called for an increase of at least 0.30 percent. The central bank has raised the benchmark lending rate twice this year from a record-low 7.25 percent in an effort to tame inflation.
Homebuilder Gafisa SA gained 5.7 percent to 2.80 reais as Grupo BTG Pactual recommended buying the stock on the outlook for profit.
Vale lost 1.9 percent to 26.45 reais. The Bloomberg Base Metals 3-Month Price Commodity Index declined 2.5 percent.
Usiminas tumbled 9.4 percent to 6.64 reais, its biggest one-day drop since October 2008. Mantega told reporters today in Brasilia that the government may cut import taxes on materials such as steel.
“That measure would be very negative for Usiminas as it would increase competition in the domestic market and push its products’ prices down,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil.
The Ibovespa has slumped 26 percent this year, the second-worst performance among 94 stock benchmarks tracked by Bloomberg.
Brazil’s main equity gauge trades at 11.2 times analysts’ earnings estimates for the next four quarters, compared with 9.8 for the MSCI Emerging Markets Index of 21 developing nations’ equities. Trading volume for stocks in Sao Paulo was 7.92 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.91 billion reais this year through July 3, according to data compiled by the exchange.