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Ibovespa Ends Four-Day Advance as Brazilian Inflation Saps MRV

Sept. 10 (Bloomberg) -- The Ibovespa fell for the first time in five sessions as data showing a measure of Brazilian inflation accelerated faster than forecast spurred speculation policy makers will step up interest-rate increases.

MRV Engenharia e Participacoes SA led losses by real estate companies. Cosmetics maker Natura Cosmeticos SA was the worst performer among consumer stocks on the gauge. Companies founded by former billionaire Eike Batista including OGX Petroleo e Gas Participacoes SA tumbled. Losses were limited as iron-ore producer Vale SA rose after a report showed industrial output expanded more than forecast in China, its main export market.

The Ibovespa sank 0.5 percent to 53,979.03 at the close of trading in Sao Paulo, with 36 of 73 member stocks falling. The gauge entered a bull market yesterday after extending gains since this year’s low on July 3 to 20 percent. Brazil’s IGP-M inflation index of wholesale, construction and consumer prices climbed 1.02 percent in the 10 days beginning Aug. 21, more than forecast by all 13 economists surveyed by Bloomberg.

“Even with the Ibovespa posting a significant recovery in the past few weeks, there needs to be an improvement in the fundamentals of Brazil’s economy for it to keep rising, and so far we haven’t seen it,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil in Sao Paulo, said in a phone interview.

MRV fell 3.1 percent to 9.69 reais. Natura declined 2.9 percent to 48.20 reais. Brazilian swap rates on contracts due in January 2015 added three basis points, or 0.03 percentage point, to 10.32 percent.

Relative Strength

Brazil’s benchmark gauge earlier gained as much as 0.9 percent as commodities exporters rallied. China’s industrial output rose 10.4 percent in August from a year earlier, the National Bureau of Statistics said. That compares with the median estimate for 9.9 percent growth among economists surveyed by Bloomberg and a 9.7 percent gain in July.

Voting shares of Vale, whose top export market is China, climbed 2.4 percent to 37.85 reais, leading gains on the MSCI Brazil/Materials index, which was the best performer among 10 industry groups.

The Ibovespa’s 14-day relative strength index rose to 70.8 yesterday, surpassing for the first time since Jan. 3 the level of 70 that some traders see as a sign a market measure has risen too fast and may be poised for a reversal. The stock benchmark slumped 29 percent in the six months following that day.

OGX, MMX

OGX, the third-heaviest-weighted stock on the benchmark gauge, sank 12 percent to 38 centavos, contributing most to the Ibovespa’s decline. The number of short-interest contracts on the oil producer founded by Batista rose to a record 594.8 million yesterday, according to data compiled by Bloomberg. The ratio of borrowed shares, an indication of short selling, was 39.5 percent, the highest among the benchmark gauge’s 73 member stocks.

MMX Mineracao & Metalicos SA, Batista’s mining company, plunged 17 percent to 1.89 reais, the most in two months. Trafigura Beheer BV and Mubadala Development Co. plan to buy a controlling stake in Batista’s iron-ore port. The securities linked to port royalties, called MMXM11, surged 12 percent to 2.68 reais.

Oil company HRT Participacoes em Petroleo SA tumbled 18 percent to 1.28 reais after saying a third well drilled off the coast of Namibia is dry.

Brazil’s main equity index has dropped 21 percent in dollar terms this year, compared with a decline of 6 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 4.85 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.73 billion reais this year through Sept. 6, according to data compiled by the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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