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Ibovespa Falls as Brazil Rating Concern Outweighs Retail Sales

March 13 (Bloomberg) -- The Ibovespa fell as concern that Brazil’s credit rating will be cut outweighed a surprise increase in retail sales and a rally by power utilities.

State-controlled oil producer Petroleo Brasileiro SA snapped a two-day winning streak. CPFL Energia SA climbed the most on the BM&FBovespa Electric Energy Index as concern eased that utilities’ profits will be hurt by a drought that has cut production of hydroelectric power.

The Ibovespa retreated 0.9 percent to 45,443.83 at the close of trading in Sao Paulo. Forty-six stocks fell on the gauge while 26 gained. The real lost 0.3 percent to 2.3628 per dollar at 5:27 p.m. local time. Brazil’s central bank President Alexandre Tombini and directors met today with Standard & Poor’s analysts.

“Investors fear that the agencies are preparing to downgrade Brazil,” Fernando Goes, an analyst at the brokerage firm Clear Corretora, said in a phone interview from Sao Paulo. “The increase in retail sales and industrial production earlier this week are not enough to change the perception that the economy is still weak.”

Brazil’s retail sales increased 0.4 percent in January from a month earlier, according to data from the national statistics bureau. The median estimate among 40 economists surveyed by Bloomberg was for a decline of 0.3 percent. Industrial production climbed 2.9 percent.

Petrobras, as Petroleo Brasileiro is known, lost 1.6 percent to 13.11 reais. Vale SA, the world’s largest iron-ore producer, declined 2.1 percent to 25.90 reais. The MSCI Brazil/Materials index retreated 1.5 percent.

Power Utilities

Standard & Poor’s placed Brazil’s rating on negative outlook in June, and Moody’s Investors Service in October lowered its outlook to stable from positive, citing deteriorating debt and evidence of slow growth.

Finance Minister Guido Mantega announced on Feb. 20 a reduction of 44 billion reais, or 4.2 percent, in budgeted expenditures for this year as Brazil acts to shore up fiscal management. Economists covering Brazil lowered their forecast for gross domestic product growth this year to 1.68 percent from a previous estimate of an advance of 1.7 percent, according to the central bank’s weekly survey released March 10.

CPFL rose 4.5 percent to 17.60 reais, its highest price since Feb. 12. The power utilities index gained 2.4 percent. Brazil’s government will announce aid for power distributors this afternoon, said an official briefed on the plan who asked not to be identified, citing internal policy.

Trading Volume

“Utilities have been suffering a lot with prospects of lower revenue and higher costs, so the government saying they may help them is making stocks recover a little,” Antonio Goes, a senior analyst at the brokerage firm TOV Corretora, said in a phone interview from Rio de Janeiro.

The Ibovespa has tumbled more than 19 percent from a bull-market high on Oct. 22 as inflation exceeded policy makers’ target and 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 5.8 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.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Dennis Fitzgerald, Richard Richtmyer

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