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Ibovespa Drops as Estacio Sinks on Brazil Interest-Rate Outlook

Jan. 13 (Bloomberg) -- The Ibovespa fell as education company Estacio Participacoes SA led a decline in consumer stocks amid concern that higher Brazilian interest rates will curb demand for equities, outweighing gains in homebuilders.

Steelmaker Gerdau SA sank to the lowest since November. State-run oil producer Petroleo Brasileiro SA contributed most to the benchmark gauge’s decline. Direcional Engenharia SA and Even Construtora e Incorporadora SA rose as previews of their 2013 financial results buoyed homebuilders amid speculation the industry is poised to rebound.

The Ibovespa fell 0.5 percent to 49,426.90 at the close of trading in Sao Paulo, with 42 of its 72 member stocks trading lower. The real rose 0.1 percent to 2.3557 per dollar at 5:27 p.m. local time. Swap rates, a gauge of expectations for interest-rate moves, climbed on shorter-term contracts as a central bank survey showed economists covering Brazil increased their median forecast for inflation by year-end to 6 percent from 5.97 percent from a week earlier.

“The fundamentals of the Brazilian economy seem worse than expected, and as interest rates go up, equities become less attractive,” Joao Pedro Brugger, who helps oversee 400 million reais at Leme Investimentos Ltda., said in a phone interview from Florianopolis, Brazil.

Brazil’s gross domestic product will expand 2.25 percent this year, compared with 2.87 percent growth for Latin American economies, according to the median forecast of analysts surveyed by Bloomberg.

Estacio declined 1.9 percent to 19.20 reais. Gerdau lost 2.1 percent to 17.65 reais. Petrobras, as Petroleo Brasileiro is also known, dropped 1.3 percent to 15.77 reais.

Acucar Rally

Direcional gained 1.8 percent to 11.20 reais after reporting a 17 percent increase in 2013 booked sales. Even rose 2.1 percent to 7.75 reais as it said new projects started in the fourth quarter are valued at 1.23 billion, more than triple the figure in the previous three months.

Cia. Brasileira de Distribuicao Grupo Pao de Acucar rose 1 percent to 97.11 reais. Brazil’s biggest retailer reported 2013 sales of 57.7 billion reais, beating the average forecast of 56.9 billion by 11 analysts surveyed by Bloomberg.

The Ibovespa posted the worst performance in 2013 among the 20 biggest equity indexes tracked by Bloomberg as the central bank boosted borrowing costs to curb inflation that exceeded the government’s target for a third consecutive year.

Trading volume of stocks in Sao Paulo was 5.29 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 7.42 billion reais in 2013, according to data available from the exchange.

To contact the reporters on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net; Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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