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Ibovespa Falls as U.S. Budget Concern Erodes Global GDP Outlook

Sept. 25 (Bloomberg) -- Brazilian stocks fell for a second day as concern that U.S. policy makers will fail to reach a budget agreement needed to avert a government shutdown eroded investor confidence in the global economic expansion.

Tim Participacoes SA sank the most in 14 months after Banco Santander SA lowered the wireless phone carrier to hold from buy. Competitor Oi SA was the worst performer on the benchmark index. Pulp producer Fibria Celulose SA led gains in commodity exporters as metal prices rebounded.

The Ibovespa retreated 0.3 percent to 54,261.11 at the close of trading in Sao Paulo with 34 stocks lower and 35 higher. The real weakened 1.3 percent to 2.2304 per dollar at 5:19 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials added 0.2 percent, snapping a four-day decline.

“In the short term, the concern about the debt ceiling in the U.S. will be the main problem for equities as higher risk aversion drives people away from emerging markets including Brazil,” Alvaro Bandeira, a partner at Orama Asset Management, said in a phone interview from Rio de Janeiro.

U.S. Treasury Secretary Jacob J. Lew said yesterday that investor confidence that a deal can be struck to raise the borrowing limit is “a bit greater than it should be.” The debt ceiling may be reached some time after the middle of next month, according to the Treasury Department.

Tim, Oi

Tim fell 5.1 percent to 10.51 reais. It had surged 9.6 percent yesterday after Madrid-based Telefonica SA agreed to pay $596 million to increase its stake in Telecom Italia SpA, which controls Tim. The deal spurred speculation that the Italian company may sell the Brazilian unit as part of a plan to reduce debt.

There are “huge uncertainties” about how a sale of Tim would benefit minority shareholders, Santander analysts Valder Nogueira and Bruno Mendonca wrote in a note to clients today, in which they lowered their recommendation from buy.

Oi fell 8.7 percent to 4.70 reais.

Fibria rose 1.4 percent to 26.30 reais, leading MSCI Brazil/Materials Index gains. Steelmaker Cia. Siderurgica Nacional SA jumped the most in a week, gaining 1 percent to 9.45 reais as industrial metals advanced after a report showed that sales of new homes in the U.S. increased last month. The Bloomberg Base Metals 3-Month Price Commodity Index advanced 0.5 percent.

“Looking ahead, the outlook for the global economy seems to be positive for commodities,” Bandeira said. “A weaker real is also positive for exporters, which is the case of many commodities producers.”

Brookfield, Abril

Homebuilder Brookfield Incorporacoes SA added 2.4 percent to 1.69 reais after selling a 20 percent stake in a real estate project in Sao Paulo for 153 million reais. Education group Abril Educacao SA gained 3 percent to 34 reais after saying in a regulatory filing it plans to buy back as much as 3 percent of outstanding shares over the next year.

The Ibovespa entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 18 percent in dollar terms this year, compared with a decline of 4.6 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo today was 5.51 billion reais. That compares with a daily average of 7.72 billion reais this year through Sept. 23, according to data from 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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