The Ibovespa fell for the first time in three sessions as homebuilder Brookfield Incorporacoes SA led declines among companies that depend on domestic sales amid increased bets on higher Brazilian borrowing costs.
Lojas Americanas SA dropped the most in the MSCI Brazil/Consumer Discretionary Index. Tobacco company Souza Cruz SA, the Brazilian maker of the Lucky Strike and Dunhill brands, fell after reporting 2013 net income that was less than analysts forecast. Phone carrier Oi SA rallied after saying banks it didn’t name agreed to underwrite 6 billion reais of new shares as part of its merger with parent Portugal Telecom SGPS SA.
The Ibovespa retreated 0.8 percent to 47,710.82 at the close of trading in Sao Paulo, with 55 of its 72 member stocks declining. The gauge gained 3.1 percent in the previous two trading sessions. The real depreciated 1.1 percent to 2.4058 per dollar at 5:36 p.m. local time, adding to speculation that a weaker currency will fuel inflation. Swap rates on the contracts due in January 2017 rose 0.03 percentage point to 12.68 percent.
“The outlook for higher interest rates is really making stocks look unattractive,” Clodoir Vieira, a partner at consulting firm Compliance Comunicacao Empresarial in Sao Paulo, said in a telephone interview. “Why would someone risk buying stocks if government bonds offer returns of 12 percent?”
Brazil will raise the target rate to 12 percent by the end of 2015, according to the median forecast in a central bank survey of economists published today. That compares with 11.88 percent a week earlier. Policy makers have raised the benchmark by 3.25 percentage points since April to curb inflation.
Brookfield fell 6.4 percent to 1.17 reais. Property developer BR Properties SA lost 1.3 percent to 16.56 reais, the biggest one-day decline in a week. Lojas Americanas retreated 0.9 percent to 14.47 reais.
Centrais Eletricas Brasileiras SA, the state-run electrical utility known as Eletrobras, dropped 1.7 percent to 9.31 reais. There is a 27 percent chance that Brazil will need to adopt power-rationing measures this year, up from 14 percent last month, as reservoirs feeding hydropower dams recede, Citigroup Inc. analysts Marcelo Britto and Kaique Vasconcellos wrote in a research note to clients.
Souza Cruz declined 3.7 percent to 20.03 reais. The company posted adjusted net income of 1.69 billion reais in 2013, compared with an average estimate of 1.75 billion reais among seven analysts surveyed by Bloomberg.
Oi advanced 2.7 percent to 4.19 reais. Oleo e Gas Participacoes SA gained 3.2 percent to 32 centavos after saying creditors agreed to the terms of $215 million in funding for the oil producer that will strip control from former billionaire Eike Batista.
Brazil’s benchmark equity index has tumbled 15 percent from a bull-market high on Oct. 22 as concern mounted that higher government spending will lead to a reduction in the country’s credit rating. Trading volume of stocks in Sao Paulo today was 5.05 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.33 billion reais this year, according to data from the exchange.