The Ibovespa retreated after Citigroup Inc. lowered its recommendation on Brazilian stocks to the equivalent of sell, outweighing a rally in retailers as traders pared bets on interest-rate increases.
Iron-ore producer Vale SA contributed the most to the benchmark’s decline as prices for the steel-making ingredient fell for the first time in eight days. State-run oil producer Petroleo Brasileiro SA tumbled as crude dropped. B2W Cia. Digital led retailers higher as swap rates, a gauge of expectations for interest-rate moves, fell after a central bank survey showed economists cut growth forecasts.
The Ibovespa lost 0.3 percent to 45,075.50 at the close of trading in Sao Paulo. The gauge has tumbled 26 percent this year. The real weakened 0.3 percent at 5:26 p.m. local time to 2.2599 per dollar. Citigroup cited a “discouraging mix” of a depreciating currency, slower growth and political unrest in changing its call on Brazilian equities.
“We expect weak performance from the Brazilian market in the next few months,” Citigroup strategist Stephen Graham wrote in a research note.
Inflation is above the upper limit of the central bank’s target, gross domestic product growth trails that of other major emerging economies and President Dilma Rousseff’s popularity has plunged amid street demonstrations.
Vale fell 1.4 percent to 26.08. Petrobras, as Petroleo Brasileiro is also known, slipped 1.1 percent to 14.98 reais.
The Ibovespa earlier rose as much as 1.2 percent as retailers advanced. B2W jumped 3.4 percent to 8.45 reais, reducing this year’s slump to 50 percent.
Central bankers hold a two-day policy meeting this week after lifting the benchmark rate 0.75 percentage point in the past two meetings from a record-low 7.25 percent to tame inflation.
“Analysts are cutting growth forecasts day after day, so it’s not likely that the central bank will speed up the pace of rate increases,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview. “There is growing concern about the outlook for economic activity, but after the huge losses we’ve seen this year, the Ibovespa has some room for recovery.”
Signs that growth is slowing more than the Brazilian government expected should spur the central bank to lift the benchmark rate by 0.5 percentage point, down from a previous forecast of 0.75 percentage point, JPMorgan Chase & Co. analysts including Fabio Akira wrote in a note to clients.
Arezzo Industria & Comercio SA gained 3.6 percent to 33.78 reais after Banco Itau BBA SA recommended buying the footwear maker’s shares.
Brazil’s main equity gauge trades at 11.2 times analysts’ earnings estimates for the next four quarters, compared with 9.7 for the MSCI Emerging Markets Index of 21 developing nations’ equities. Trading volume for stocks in Sao Paulo was 5.07 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.88 billion reais this year through July 4, according to data compiled by the exchange.