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Ibovespa Falls to Lowest in Four Weeks on Earnings, Fed Concern

Nov. 7 (Bloomberg) -- The Ibovespa fell to a four-week low as Telefonica Brasil SA led declines in phone companies after earnings trailed forecasts and exporters tumbled amid concern that the Federal Reserve will reduce U.S. stimulus.

The MSCI Brazil/Telecommunication Services Index dropped to the lowest level since September. Iron-ore producer Vale SA sank as MSCI’s gauge of Brazilian material producers posted the worst performance among 10 industry groups. Online retailer B2W Cia. Digital fell the most on the Ibovespa. Power utility Eletropaulo Metropolitana SA rallied after posting a surprise profit in the third quarter.

Brazil’s benchmark equity index dropped 1.2 percent to 52,740.79 at the close of trading in Sao Paulo, with 52 of its 72 member stocks lower. The real weakened 0.9 percent to 2.3098 per dollar at 5:29 p.m. local time. Telefonica sank 3.1 percent to 45.41 reais after posting third-quarter adjusted net income of 760.2 million reais, missing an average estimate of 921.2 million reais among analysts surveyed by Bloomberg.

“Competition in this industry is tough, and companies are struggling to sustain profit margins,” Luis Gustavo Pereira, a strategist at Futura Corretora brokerage in Sao Paulo, said in a phone interview.

Telefonica competitor Tim Participacoes SA fell 0.6 percent to 11.06 reais. The stock has dropped 3.7 percent since it reported quarterly earnings that trailed estimates on Oct. 29.

Global Slide

Vale fell 3.3 percent to 33.32 reais. B2W tumbled 7.3 percent to 12.99 reais.

The MSCI World Index sank 0.9 percent as investors speculated that the Federal Reserve may scale back monetary stimulus after data showed the U.S. economy expanded faster than forecast. Gross domestic product in the world’s largest economy rose at a 2.8 percent annualized rate after a 2.5 percent gain the prior three months, a Commerce Department report showed today in Washington.

“The Ibovespa seems to be tracking global stocks lower,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil SA in Sao Paulo, said in a phone interview. “GDP numbers in the U.S. were a bit stronger than forecast, and some people could be taking them as a sign that the tapering of stimulus could start earlier than expected.”

Investors are watching U.S. economic data after the Fed said last week it needs to see more evidence of sustained improvement before slowing its $85 billion monthly asset purchases, which have helped boost demand for riskier emerging-market assets.

Eletropaulo Earnings

Eletropaulo jumped 9.2 percent to 9.50 reais. Adjusted net income doubled to 27 million reais in the three months through September from the same period a year earlier, according to data compiled by Bloomberg after the company released results yesterday. The average estimate among analysts surveyed by Bloomberg was for a loss of 130.5 million reais.

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 23 percent in dollar terms this year, compared with a decline of 4.4 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 8.78 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.

To contact the reporters on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

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

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