The Ibovespa fell for the first time in three days as BRF SA, Latin America’s biggest food processor, led consumer stocks lower after Brazil’s central bank raised the target lending rate for a seventh straight meeting.
Cosmetics maker Natura Cosmeticos SA declined to the lowest since January 2012. State-owned oil company Petroleo Brasileiro SA contributed the most to the benchmark index’s decline after denying a report that it plans to raise domestic fuel prices. BRF also sank as Goldman Sachs Group Inc. cut its recommendation to the equivalent of hold from buy. LPS Brasil Consultoria de Imoveis SA dropped the most among homebuilders.
The Ibovespa retreated 0.8 percent to 49,696.28 at the close of trading in Sao Paulo. Forty-four of the index’s 72 member stocks dropped. The real weakened 0.3 percent to 2.3656 per U.S. dollar at 5:23 p.m. local time. Brazilian swap rates, a gauge of expectations for interest-rate moves, rose on most contracts.
“We might see more people moving toward fixed-income assets as rates go up,” Otavio Vieira, who helps manage 350 million reais as a partner at hedge fund Fides Asset Management, said by phone from Rio de Janeiro. “In the short term, the central bank’s decision will probably weigh on the Ibovespa.”
Policy makers, led by central bank President Alexandre Tombini, raised the target lending rate yesterday to 10.5 percent from 10 percent to curb inflation that has exceeded the government’s target for a third straight year. The decision led analysts at JPMorgan Chase & Co. and Credit Suisse Group AG to forecast a 0.25 percentage point increase in February.
BRF lost 3.1 percent to 43.34 reais. Natura fell 2.5 percent to 37.62 reais. LPS Brasil dropped 3.5 percent to 13.60 reais. Swap rates on contracts due in January 2015 increased 0.19 percentage point to 10.93 percent.
Petrobras, as Petroleo Brasileiro is known, fell 2.8 percent to 15.59 reais. The company said late yesterday that no decision has been made about raising fuel prices after newspaper Folha de S.Paulo reported that the producer may increase them before June.
“We still have a lot of stuff weighing on the Ibovespa, such as the problems with Petrobras’s price policy,” Fernando Goes, an analyst at Clear Corretora in Sao Paulo, said in a phone interview. “Until there’s a mechanism that really allows the company to adjust its prices on a regular basis, without having to ask the government for permission first, shares will remain under pressure.”
The Ibovespa has tumbled 12 percent from a bull-market high on Oct. 22 as concern mounted that increased government spending will lead to a reduction in Brazil’s credit rating.
Trading volume of stocks in Sao Paulo was 5.79 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.