Bovespa Falls as Eletrobras Decline Outweighs Embraer Advance

The Bovespa index fell the most in two weeks as Centrais Eletricas Brasileiras SA tumbled after Brazil cut electricity costs more than previously announced and as material stocks dropped, overshadowing a surge by Embraer SA.

Eletrobras, as the state-owned utility is known, slipped the most on the benchmark. Steelmaker Usinas Siderurgicas de Minas Gerais SA dropped to the lowest since November. Embraer, the world’s fourth-largest planemaker, rallied to an eight-month high after signing a contract worth as much as $4 billion with Republic Airways Holdings Inc.

The Bovespa fell 1.3 percent to 61,169.83 at the close of trading in Sao Paulo. Fifty-five stocks dropped on the index while 13 advanced. The gauge is down 1.3 percent this week. Brazilian markets are closed tomorrow for a holiday.

Voting shares of Eletrobras fell 7.5 percent to 7.25 reais after President Dilma Rousseff said yesterday that electricity rate cuts taking effect today will pare consumers’ power costs 18 percent and those for industry by 32 percent, compared with the reductions of 16.2 percent and 28 percent she had announced in September.

“Power utilities have been suffering a lot because of these measures, and today’s decline is a reaction to the latest announcement,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview.

Usiminas Falls

Iron-ore producer Vale SA, the stock with the biggest weight on the Bovespa, fell 2.2 percent to 38.63 reais. Usiminas, as Usinas Siderurgicas is also known, dropped 3.9 percent to 10.57 reais.

“Usiminas has been lagging all week with some reports that showed concern about the steel market,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil. “It makes sense for steelmakers to give back some of the gains, considering there are still uncertainties about the domestic economy.”

Brazil’s economy expanded an estimated 1 percent in 2012, according to the central bank, the slowest in three years. Annual inflation accelerated to 6.02 percent, the national statistics agency reported yesterday.

Earlier, the Bovespa advanced as much as 0.5 percent as Embraer surged 8.9 percent to 15.93 reais, the biggest jump in two years.

The Bovespa entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its advance to 17 percent.

Brazil’s benchmark equity gauge trades at 11.3 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume of stocks in Sao Paulo was 7.27 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.