Ibovespa Declines Most in World as Earnings Sink Consumer Stocks

The Ibovespa fell the most among the world’s biggest equity gauges after PDG Realty SA Empreendimentos & Participacoes posted a wider-than-forecast loss, stoking concern about the outlook for corporate earnings.

Pulp producer Fibria Celulose SA dropped as China planned anti-dumping measures on imports of the raw material from Brazil, the U.S. and Canada. OSX Brasil SA, the shipbuilder founded by Eike Batista, tumbled after people familiar with the matter said the company plans to file for bankruptcy protection by early next week.

The Ibovespa retreated 0.8 percent to 53,384.60 at the close of trading in Sao Paulo, with 51 of its 72 member stocks lower. It was the steepest drop among 94 equity gauges tracked by Bloomberg. The real gained 0.1 percent to 2.2873 per dollar at 5:29 p.m. local time. PDG sank 8.9 percent to 1.85 reais after saying its quarterly adjusted net loss was 84.8 million reais, compared with the 53.8 million-real average estimate of analysts surveyed by Bloomberg.

“The current scenario doesn’t seem favorable for equities,” Fausto Gouveia, who helps manage 500 million reais at Legan Administracao de Recursos, said in a phone interview. “Some companies are reporting weak earnings, like PDG, and you also have a lot of volatility in the currency, which can drive foreign investors away from Brazil for a while.”

Six of the seven consumer-goods companies on the Ibovespa that have already reported third-quarter earnings that trailed analysts’ estimates, according to data compiled by Bloomberg. Brazilian swap rates, a gauge of expectations for moves in Brazil’s benchmark borrowing costs, rose on most contracts today, dimming the outlook for domestic consumption. Rates on the contract due in January 2015 climbed seven basis points, or 0.07 percentage point, to 10.78 percent.

Budget Deficit

The real fluctuated between gains and losses as Finance Minister Guido Mantega sought to reassure investors that the government is taking steps to keep the budget deficit in check. Brazil reported last week a shortfall of 22.9 billion reais in September, wider than the median forecast of economists. The gap was 23.3 billion reais in February, the deepest since the 2008 financial crisis.

Fibria fell 2.4 percent to 28.40 reais.

OSX dropped 19 percent to 52 centavos. A bankruptcy filing would put $500 million of dollar bonds into default after Batista’s oil company and OSX’s biggest client, OGX Petroleo e Gas Participacoes SA, sought protection Oct. 30 in Latin America’s largest corporate default.

BTG Pactual Earnings

In a statement last week, the shipbuilder said it was ready to seek bankruptcy protection if management decided that was the best way to protect its interests. OSX continues to study the measure, a press official said by phone yesterday, asking not to be identified by name in accordance with company policy.

Grupo BTG Pactual, the Brazilian investment bank led by billionaire Andre Esteves, fell 1.3 percent to 30 reais after reporting adjusted net income of 746 million reais in the third quarter, missing analysts’ estimates.

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 22 percent in dollar terms this year, compared with a decline of 3.7 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 7.61 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.61 billion reais this year through Oct. 22, according to the latest data available from the exchange.

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