Ibovespa Snaps Six-Day Rally on Brazil Inflation, Growth Concern
The Ibovespa fell for the first time in seven days as speculation that Brazil will raise fuel prices stoked concern that policy makers may speed the pace of interest-rate increases even as economic growth falters.
OGX Petroleo e Gas Participacoes SA, the oil company controlled by Eike Batista, tumbled after it said cash reserves plunged 72 percent in the second quarter. B2W Cia. Digital led losses by retailers as Brazilian swap rates, a gauge of expectations for interest-rate moves, increased.
The Ibovespa lost 1 percent to 50,411.83 at 11:21 a.m. in Sao Paulo. All but eight stocks on the 71-member index declined. Economic activity, a proxy for gross domestic product in Latin America’s largest economy, rose 2.35 percent in June from a year earlier, trailing the median forecast of economists surveyed by Bloomberg for a gain of 2.70 percent.
“There’s concern about what an increase in fuel prices now would mean for inflation, which is already running at high levels,” Alvaro Bandeira, a partner at Rio de Janeiro-based Orama Asset Management, said in a phone interview. “Economic data still show weak growth, and on top of that now there’s a possibility that the central bank will increase interest rates further to deal with this additional pressure on inflation.”
Swap rates on the contract due in January 2015 rose 10 basis points, or 0.1 percentage point, to 10.12 percent. The real weakened 0.9 percent to 2.3468 per dollar.
Brazil may authorize state-run Petroleo Brasileiro SA to raise fuel prices to bolster profit, Sao Paulo-based newspaper Valor Economico reported today, citing a person at the presidential palace who it didn’t identify. The Finance Ministry didn’t respond to a request for comment from Bloomberg News.
B2W dropped 6 percent to 13.91 reais.
OGX sank 7.4 percent to 63 centavos. The producer posted an adjusted net loss of 2 billion reais in the second quarter, more than the average estimate of 1.74 billion reais among analysts surveyed by Bloomberg.
LLX Logistica SA (LLXL3) climbed 4 percent to 1.57 reais after Washington-based private equity fund EIG Global Energy Partners LLC agreed to buy a stake in the port developer, replacing Batista as controlling shareholder.
The Ibovespa has gained 12 percent from this year’s low on July 3 as higher commodities prices and a weaker real boosted raw-material exporters. Brazil’s benchmark equity gauge trades at 13.1 times analysts’ earnings estimates for the next four quarters, compared with 10.5 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
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