- Lenders contribute the most to decline of benchmark Ibovespa
- Investors watching earnings for sign recovery on the way
The Ibovespa fell the most in three weeks as disappointing earnings reports from lender Banco Bradesco SA and retailer Cia. Brasileira de Distribuicao reignited fears that weak domestic demand will delay Brazil’s recovery from recession.
Bradesco and rival Itau Unibanco Holding SA contributed the most to the benchmark equity index’s decline on Thursday. Cia. Brasileira, which is also known as GPA and operates electronic-goods stores and the Pao de Acucar supermarket chain, was the worst performer on the index.
Stocks have rallied 31 percent this year on bets that a new government will be able to shore up the country’s finances and restore confidence. While investors have been able to glean highlights from reports earlier this week, Thursday’s gloomy results were hard to ignore. Bradesco reported second-quarter profit that missed analysts’ estimates, and Pao de Acucar reported a wider-than-expected loss after taking an expense related to a probe.
"Equities have gained the most, based only on hope," Paulo Henrique Amantea, an analyst at brokerage Guide Investimentos, said from Belo Horizonte, Brazil. "The reality of the Brazilian economy is very difficult. We need to see a real improvement of the activity to build new positions."
The Ibovespa fell 0.3 percent to 56,667.12 at the close of trading in Sao Paulo as 25 of its 59 stocks dropped. Bradesco lost 4.5 percent as a public prosecutor confirmed a report from newspaper Valor Economico that 10 people, including executives of the bank, were accused in a probe regarding a bribery scheme to avoid the payment of taxes. Bradesco said its unaware of the accusation.
Itau declined 1.1 percent and Pao de Acucar’s controller Cia Brasileira de Distribuciao plunged 10 percent. State-controlled oil producer Petroleo Brasileiro SA followed crude lower.