Eletrobras, Petrobras Fall on S&P Outlook Cut: Rio Mover

Centrais Eletricas Brasileiras SA and Petroleo Brasileiro SA plunged after Standard & Poor’s lowered the state-run companies’ credit outlook as Brazilian economic growth slows and government debt levels rise.

Eletrobras, as the electricity producer is known, dropped 5.3 percent to 9 reais at the close of trading in Sao Paulo. Rio de Janeiro-based Petrobras slid 3.2 percent to 18.84 reais. Both companies are rated BBB, two levels above junk.

Standard & Poor’s revised their outlook to negative from stable yesterday after doing the same for Brazil’s BBB rating citing forecasts for a third year of “modest” economic growth and “weaker” fiscal policy, the ratings company said in a statement yesterday. The outlook cut for Eletrobras and Petrobras “reflects the similar action” on Brazil, Standard & Poor’s said in a separate statement.

Brazil’s central bank in April shifted its focus to containing inflation by increasing the benchmark interest rate for the first time in almost two years. Brazil’s economy has posted growth below analyst forecasts for five straight quarters. The economy expanded 0.55 percent in the first quarter, less than the 0.9 percent median forecast of analysts polled by Bloomberg.

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