- Lenders Bradesco, Itau contribute most to gauge's drop
- Emerging stocks decline as appetite for riskier assets falls
Brazil’s stocks led losses among the world’s biggest markets on concern that the outlook for higher interest rates in the U.S. will spur outflows from an economy facing its longest recession since the 1930s.
Meatpacker JBS SA fell the most in two months after its unit in the U.S. posted disappointing quarterly results. Lender Banco Bradesco SA contributed the most to the Ibovespa’s drop after boosting third-quarter bad-loan provisions. Pulp producer Fibria Celulose SA, which gets most of its revenue from exports, slumped as the real strengthened.
The equity benchmark joined an emerging-market equity gauges rout after the Federal Reserve’s statement Wednesday caused traders to push forward wagers on a U.S. interest-rate increase. Brazilian stocks have lost 21 percent from this year’s peak in May as economists cut forecasts for growth amid political turmoil that has hampered efforts to shore up fiscal accounts.
"Investors are already preparing to leave Brazil for better returns in the U.S.," Pedro Paulo Silveira, the chief economist at the brokerage TOV Corretora, said from Sao Paulo. "It’s very hard to convince them of the contrary when prospects for the local economy are so uncertain."
The Ibovespa fell 2.4 percent to 45,628.35 at the close of trading in Sao Paulo, dropping to a four-week low. The gauge was trading at 10.6 times estimated earnings, the lowest level this month and 3.6 percent below the MSCI Emerging Markets index’s valuation. Fibria, JBS and Bradesco slumped at least 4.5 percent.
President Dilma Rousseff’s efforts to trim a budget deficit suffered another blow after the government failed to find support in Congress for a measure to boost revenue. The country’s lower house delayed a vote expected for Wednesday on a bill to encourage the repatriation of overseas assets, which if passed would mark a victory for Rousseff’s administration. Brazil’s sovereign rating suffered four downgrades since 2014, including a cut to junk by Standard & Poor’s last month.
Mobile phone carrier Oi SA was the best performer on the Ibovespa on speculation of a possible merger with Tim Participacoes SA. Newspaper O Globo reported that Oi’s board is said to approve, with changes, a capital injection of $4 billion from LetterOne under the condition that it merges with Tim.