Ibovespa Drops as Brookfield Declines on Interest-Rate Outlook

The Ibovespa fell as Brookfield Incorporacoes SA led homebuilders’ losses on concern higher borrowing costs in Brazil will curb the economic recovery.

The BM&FBovespa Real Estate Index dropped the most in six weeks. Miner MMX Mineracao & Metalicos SA slumped the most on the benchmark gauge, leading a decline in companies controlled by the Brazilian billionaire Eike Batista. Losses were limited as oil company Petroleo Brasileiro SA followed crude prices higher amid signs that growth is picking up in the U.S.

The Ibovespa fell 0.6 percent to 56,036.26 at the close of trading in Sao Paulo. Thirty-nine stocks on the gauge dropped while 31 rose. The Standard & Poor’s GSCI index of 24 raw materials added 1 percent, increasing for the first time in five days, as reports showed U.S. home prices rose and consumer confidence improved. The real fell 0.9 percent to 2.0749 per dollar.

“The problem with interest rates is that there isn’t a consensus on what the central bank’s next move will be, and today traders seem to be betting heavier on a bigger increase,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview. “If the pace of rate increases accelerates, that could have an impact on equities.”

Brazilian swap rates, a gauge of expectations of central bank interest-rate moves, advanced on most contracts as policy makers started a two-day meeting today. Of 57 economists surveyed by Bloomberg, 38 predict that the target rate will be lifted by 0.25 percentage point, while 19 are betting on an increase of a half-percentage point.

PDG Declines

Brookfield slumped 5.3 percent to 1.96 reais. PDG Realty SA fell 3.7 percent to 2.60 reais, while MRV Engenharia & Participacoes SA lost 5 percent to 7.22 reais. The BM&FBovespa Real Estate Index retreated 1.1 percent.

Petrobras, as Petroleo Brasileiro is known, climbed 0.7 percent to 20.07 reais. Crude rallied 1 percent in New York.

MMX slipped 9 percent to 2.03 reais, while oil company OGX Petroleo & Gas Participacoes SA dropped 5.1 percent to 1.66 reais.

The Ibovespa was the only major benchmark gauge in the Americas to decline today. The index has dropped 8.1 percent this year, underperforming emerging markets including China, Russia and India.

Brazil’s main equity index trades at 12.9 times analyst earnings estimates for the next four quarters, compared with 10.8 for the MSCI Emerging Markets Index of 21 developing nations’ equities, according to data compiled by Bloomberg.

Trading volume for stocks in Sao Paulo was 6.46 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.73 billion reais this year through May 24, according to data compiled by the exchange.

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