- Lenders Itau, Bradesco contribute most to gauge's decline
- Market expected details on budget adjustment, trader said
The Ibovespa fell for a second straight day on speculation newly appointed Finance Minister Nelson Barbosa won’t be a strong enough advocate for reining in Brazil’s growing budget deficit.
The benchmark gauge reversed gains after Barbosa ended a conference call with investors without providing a specific roadmap for restoring Brazil’s fiscal health. Lenders Itau Unibanco Holding SA and Banco Bradesco SA contributed the most to the gauge’s decline. State controlled oil producer Petroleo Brasileiro SA, lender Banco do Brasil SA and power utility Centrais Eletricas Brasileiras were among the worst performers on the index.
Investors had wanted to hear more specifics from Barbosa on his first day in office on his plan to shore up the budget and pull the country out of what’s forecast to be its longest recession since the 1930s. Fitch Ratings last week cut the country to junk, becoming the second major ratings company to do so, on Brazil’s inability to shore up its finances amid political turmoil including efforts to impeach President Dilma Rousseff.
"The market was expecting more specific comments, and he didn’t deliver that," said Ari Santos, a trader at brokerage H.Commcor in Sao Paulo. "The minister didn’t mention the government’s plan for overcoming obstacles to winning approval for the cost cuts needed to put the country back on track. It was disappointing -- not what he said, but what he didn’t say."
The Ibovespa fell 1.3 percent to 43,347.18 at 2:20 p.m. in Sao Paulo as two stocks dropped for each one that gained. Itau declined 1.6 percent and Bradesco slid 2.9 percent. Petrobras, as Petroleo Brasileiro is known, Banco do Brasil and Centrais Eletricas, or Eletrobras, declined at least 3.1 percent.
Stock valuations fell to the lowest since Jan. 7 Monday after Barbosa said that the government will discuss ways of cut expenses, without saying how. Brazilian shares have tumbled 13 percent this year, sending average valuations to 10.2 times estimated earnings, on concern that political turmoil is making it difficult to shore up the budget amid the country’s longest recession since the 1930s.
The Ibovespa rose as much as 0.7 percent earlier as steelmaker Usinas Siderurgicas de Minas Gerais SA followed metals prices gain. The Bloomberg Base Metals Three-Month Price Commodity Index increased 1.4 percent as China is said to consider deeper copper supply cuts.
For-profit college manager Gaec Educacao SA, which operates under the brand Anima, climbed the most in a month after agreeing to acquire the university Sociesc, which operates in the south of Brazil, the second-richest region in the country.
"The company has been working to become the best education company in Brazil," said Adeodato Volpi Netto, the head of capital markets at equity research firm Eleven Financial in Sao Paulo. "Sociesc is one of the leading universities in the South and has a big number of distance-learning students." Eleven has a buy recommendation for Anima.