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Ibovespa Declines as Banco do Brasil Tumbles on Earnings Outlook

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Nov. 12 (Bloomberg) -- The Ibovespa sank to a two-month low as Banco do Brasil SA tumbled after cutting its estimate for interest earnings and Brazilian commodity producers fell amid concern the Federal Reserve will trim U.S. monetary stimulus.

Steelmaker Cia. Siderurgica Nacional SA was the worst performer among material stocks as iron-ore producer Vale SA followed metals lower. Plane builder Embraer SA advanced after Citigroup Inc. raised its recommendation to the equivalent of hold from sell.

The Ibovespa slipped 1.6 percent to 51,804.33 today in Sao Paulo, the lowest close since Sept. 4. The real lost less than 0.1 percent to 2.3335 per U.S. dollar at 5:25 p.m. local time. Banco do Brasil sank 5.3 percent after the state-controlled lender cut its 2013 estimate for growth in net interest income, the gap between revenue from loans and the cost of paying interest on deposits, to no more than 5 percent from as high as 7 percent.

“Banco do Brasil’s forecast cut signals that the outlook for profits is not so positive,” Pedro Galdi, the head strategist at SLW Corretora in Sao Paulo, said in a telephone interview. “There’s also some growing concern that the Fed may start reducing stimulus sooner than expected, which is affecting demand for equities.”

Dallas Fed President Richard Fisher, who has said he wouldn’t rule out backing a reduction in bond buying by March, said at an event in Melbourne today that monetary accommodation “becomes riskier by the day.” The median estimate of 32 economists surveyed by Bloomberg is that policy makers will reduce the monthly pace of bond buying to $70 billion at their March 18-19 meeting. The group next meets Dec. 17-18.

CSN, Vale

Fifty-two of the Ibovespa’s member stocks declined today while 18 advanced. CSN, as Cia. Siderurgica is known, lost 3.6 percent to 12.40 reais. Vale fell 2.5 percent to 32.43 reais. The Bloomberg Base Metals 3-Month Price Commodity Index sank 0.5 percent.

MRV Engenharia & Participacoes SA retreated 2 percent to 8.73 reais after earlier rising as much as 3.1 percent. The company posted third-quarter adjusted net income of 130.9 million reais, which compares with an average analysts’ estimate of 120.6 million reais, according to data compiled by Bloomberg.

Twenty-four of the 45 companies on the Ibovespa that have reported third-quarter figures exceeded analysts’ estimates, according to data compiled by Bloomberg.

Embraer Scenario

Embraer added 1.9 percent to 18.10 reais, paring a decline over the past month to 5 percent.

The recent pullback in the shares has “created a somewhat more balanced risk-reward scenario” for Embraer’s shares, Citigroup analysts including Stephen Trent wrote in a research note.

Brazil’s main equity index 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 25 percent in dollar terms this year, compared with a decline of 6.2 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 7.39 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 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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