Brazil’s stocks led world losses this week, missing out on a rally in emerging markets, as Goldman Sachs Group Inc. predicted Latin America’s largest economy will face more challenges.
The shares swung between gains and losses on Friday after the New York-based bank said Brazil will continue to face strong headwinds from high borrowing costs, political turmoil and a drop in consumer and corporate confidence. The economy contracted more than forecast in August as policy makers keep interest rates at a nine-year high to combat above-target inflation.
The benchmark equity gauge has plunged 19 percent from this year’s peak in May as President Dilma Rousseff struggles to revive an economy poised for the longest recession since the 1930s amid a widening corruption scandal. Her low popularity has spurred calls for an impeachment, hindering efforts to shore up finances and avoid credit downgrades. Officials will weaken this year’s budget target for the third time, according to a report by Folha de S.Paulo.
“It’s a really tough spot for investors in Brazil,” Raphael Figueredo, an analyst at brokerage Clear Corretora, said from Sao Paulo. “The economy is getting worse along with the political scenario. That means the fiscal situation may deteriorate further.”
The Ibovespa was little changed at 47,190.31 at 2:27 p.m. in Sao Paulo after falling as much as 1.4 percent. The gauge is down 4.3 percent this week. The slide in the index bucked the trend for developing-nation stocks, which climbed amid speculation the U.S. will keep lower rates for longer. Even after the decline, Brazil’s stock benchmark is trading in line with its five-year valuation, according to Bloomberg data based on estimated earnings.
Vale SA, the world’s largest iron-ore miner, led losses among raw-material companies. Other exporters including pulp producer Fibria Celulose SA and planemaker Embraer SA advanced as the real weakened.