Bovespa Falls Most in Two Months as Inflation Concern Sinks B2W

The Bovespa index fell the most in two months after analysts raised their forecasts for Brazilian inflation, adding to concern that price increases may derail the recovery in Latin America’s biggest economy.

Online retailer B2W Cia. Global do Varejo sank the most since Oct. 18, and cosmetics maker Natura Cosmeticos SA dropped for a fourth consecutive session, its longest losing streak in a month. Light SA led declines among power utilities amid concern that lower electricity rates in Brazil will hurt the industry’s profits.

The Bovespa fell 1.9 percent to 60,027.07 at the close of trading in Sao Paulo, the biggest drop since Nov. 14. Fifty-nine stocks declined on the gauge while 10 gained. The real rose 1.7 percent to 1.9955 per U.S. dollar, the lowest level since July, after the central bank auctioned foreign-exchange swap contracts to boost the currency and curb inflation. The Bovespa’s Electric Energy Index dropped 1.8 percent.

“We don’t have any positive news that could push stocks higher,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores SA in Sao Paulo, said in a phone interview. “You see negative stuff such as economists becoming more and more pessimistic about inflation. Can inflation slow and can the economy grow at a reasonable pace this year? Sure it can. But until there’s hard evidence that this is really the case, people won’t feel very confident to buy.”

Inflation Outlook

Consumer prices will rise 5.67 percent in 2013, according to the median estimate in a central bank survey of about 100 analysts published today. That compares with a projection of 5.65 percent in the previous week. Gross domestic product will expand 3.10 percent this year, the survey indicated, down from a 3.19 percent projection in the previous week. Swap rates on most contracts rose.

Natura retreated 4.4 percent to 52.70 reais. B2W sank 5.2 percent to 15.37 reais. The online retailer removed 400,000 of its products from price-comparison website Buscape to “ensure privacy and safety of user data,” B2W said in an e-mail statement.

President Dilma Rousseff said last week that electricity rate cuts taking effect Jan. 24 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 announced in September.

“When it comes to power utilities, the market is still lost,” Joao Pedro Brugger, who helps oversee 220 million reais at Leme Investimentos, said by phone from Florianopolis, Brazil. “No one knows for sure how lower rates will affect earnings, and now that the cuts were actually bigger than expected, things got even more confusing.”

Utilities Decline

Light dropped 5.1 percent to 20.17 reais. Cia. Paranaense de Energia, the electricity distributor known as Copel, fell 2.9 percent to 32.25 reais. Centrais Eletricas Brasileiras SA sank 3.8 percent to 12.17 reais.

Banco Bradesco SA, Brazil’s second-biggest bank by market value, lost 3.1 percent to 36.59 reais after saying in a statement that fourth-quarter adjusted net income, which excludes one-time items, climbed less than forecast to 2.92 billion reais from 2.77 billion reais a year earlier, below the 2.96 billion reais median estimate of eight analysts surveyed by Bloomberg.

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 that 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 14 percent.

Brazil’s benchmark equity gauge trades at 11.1 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 7.52 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. The Sao Paulo exchange was closed Jan. 25 for a local holiday.

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