Faster Inflation Sparks Biggest Slide in Americas for Ibovespa

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A jump in Brazil’s inflation added to speculation the central bank will lift borrowing costs further, dimming the outlook for consumer companies including clothing retailer Cia. Hering. The Ibovespa led losses in the Americas.

Wholesale, consumer and construction prices rose 4.11 percent in the 12 months through May, an education and research institution based in Rio de Janeiro said on its website. That was more than the average 4.08 percent forecast from 25 economists surveyed by Bloomberg. Consumer stocks in the MSCI Brazil Index have slumped more than 16 percent in the past year, while the Ibovespa advanced 2.5 percent.

Prospects for those companies will get even worse as the central bank boosts borrowing costs in a bid to tame the fastest inflation in 11 years, according to Raphael Figueredo, an analyst at brokerage Clear Corretora. Policy makers have lifted interest rates for five straight times even as the economy heads toward the deepest recession since 1990. Their next meeting is scheduled for next week.

“There is room for policy makers to raise rates by another 0.5 percentage point,” Figueredo said by phone from Sao Paulo. “We should expect consumer stocks to suffer.”

The Ibovespa retreated 0.5 percent to 53,976.28 at the close of trading in Sao Paulo as 45 of its 66 stocks fell. Hering extended a five-day slide to 8.9 percent while online retailer B2W Cia. Digital paced losses among consumer companies. Swap rates on the contract due in May 2016 added one basis point, or 0.01 percentage point, to 13.75 percent.

Bull Market

Brazilian equities entered a bull market last month, after rallying more than 20 percent from their January low, on prospects for government spending cuts and after Petroleo Brasileiro SA reported long-delayed earnings. Since then, the Ibovespa has fallen 4.6 percent on concern Latin America’s largest economy would slow even further.

Gross domestic product shrank in the first three months of 2015, the national statistics bureau will probably report on Friday. The nation contracted 0.6 percent in the period, according to the median estimate of 36 economists surveyed by Bloomberg.

“Prospects for the Brazilian economy are very negative, and the Ibovespa’s drop reflects pessimism from investors,” Ari Santos, a trader at brokerage H.Commcor, said in by phone from Sao Paulo. “We don’t see any good news that would help improve their mood right now.”

Steelmaker Cia. Siderurgica Nacional dropped the most on the Ibovespa Thursday after Banco BTG Pactual SA recommended selling the shares. Vale SA, the world’s largest iron-ore miner, followed a slump in the steelmaking ingredient.

Trading volume of equities in Sao Paulo was 5.6 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 7 billion reais, according to the exchange.

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