Most Brazilian Stocks Fall on Inflation Concern, Growth Outlook

Most Brazilian stocks fell as speculation that the government will raise fuel prices stoked concern that policy makers may speed up 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. State-run oil producer Petroleo Brasileiro SA surged the most since April.

The Ibovespa was little changed at 50,908.34 at the close of trading in Sao Paulo as 51 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 four basis points, or 0.04 percentage point, to 10.06 percent. The real weakened 0.5 percent to 2.3365 per dollar at 5:28 p.m. local time.

Petrobras, B2W

Brazil may authorize Petrobras, as Petroleo Brasileiro is also known, 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. Energy Minister Edison Lobao denied the report while speaking to reporters in Brasilia today.

Petrobras jumped 5.2 percent to 17.83 reais, the biggest one-day advance since April 29.

B2W dropped 7.3 percent to 13.72 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 climbed 11 percent to 1.67 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 13 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 13.2 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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