Brazil's Stocks Decline as Recession Forecast Sends Ambev Lower

  • Brewer among biggest contributors to the Ibovespa's drop
  • Economists raise forecast for 2016 GDP contraction to 3.21%

The Ibovespa fell the most in the Americas as economists forecast a deeper contraction for Brazil this year, dimming the outlook for companies that depend on domestic demand.

Brewer Ambev SA and meatpacker JBS SA were among the biggest contributors to the benchmark gauge’s decline after a weekly survey from the central bank showed analysts expect Latin America’s largest economy to shrink 3.21 percent in 2016. Cosmetics maker Natura SA dropped the most in three weeks.

The Ibovespa has tumbled 17 percent in the past year as economists predict the nation is heading toward its worst recession since at least 1901 as a corruption scandal paralyzes the government and a plunge in commodities prices saps export revenue. The country’s credit rating was cut to junk last year as President Dilma Rousseff’s administration failed to get support for measures intended to trim a budget deficit.

"The scenario is getting worse for every sector of the economy," said Pedro Paulo Silveira, an economist at brokerage Nova Futura in Sao Paulo. "Prospects for profits are very negative."

The Ibovespa declined 0.5 percent to 40,376.58 at the close of trading in Sao Paulo as 36 of its 61 stocks fell. The Brazilian market was closed in the past two days because of a national holiday. Volume was 19 percent below the 30-day average as trading started three hours after the usual time following the two-day break. Ambev, Natura and JBS retreated at least 1.1 percent.

State-controlled oil producer Petroleo Brasileiro SA was among the worst performers on the benchmark index, declining 5.1 percent.

Air carrier Gol Linhas Aereas Inteligentes SA tumbled as much as 9.5 percent after Standard & Poor’s placed the company’s credit rating on watch for a possible downgrade, citing weak demand and the real’s depreciation. The currency weakened 0.7 percent to 3.9293 per dollar.

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