Ibovespa Sinks as PDG Leads Homebuilder Decline on Rate Outlook

The Ibovespa fell the most among major equity benchmarks in the Americas as PDG Realty SA led homebuilders lower amid mounting speculation that Brazilian policy makers will extend interest-rate increases.

Lojas Renner SA fell the most among retailers. BM&FBovespa SA slipped the most in eight weeks after Deutsche Bank AG cut its recommendation on the exchange operator to hold. Crude producer OGX Petroleo e Gas Participacoes SA sank the most on the gauge after saying it won’t buy nine licenses it won at an auction to explore oil in Brazil.

The Ibovespa tumbled 2.6 percent to 50,091.55 at the close of trading in Sao Paulo, with 64 of its 71 member stocks falling. The real gained 0.3 percent to 2.3720 per dollar. Brazilian swap rates on most longer-term contracts rose. The MSCI World index fell 1.3 percent as crude advanced to an 18 month-high after the U.S. said it will hold Syria’s government accountable for the use of chemical weapons.

“With the real trading at low levels, it’s possible that the central bank will keep raising interest rates for a longer period than expected,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil in Sao Paulo, said in a phone interview. “Higher oil prices following the problems in Syria pose a threat to the global recovery, which is also bad for equities.”

Brazil’s policy makers have increased the target lending rate by 1.25 percentage points this year from a record low 7.25 percent to control inflation. Officials start their two-day policy meeting today, with 49 of 51 economists surveyed by Bloomberg predicting a 0.5 percentage point increase in the benchmark rate to 9 percent.

PDG Decline

PDG lost 6.7 percent to 2.22 reais. Renner dropped 2.1 percent to 58.25 reais. BM&FBovespa fell 5.1 percent to 11.29 reais.

OGX slid 15 percent to 69 centavos. The company said in a regulatory filing that it will pay a 3.42 million real penalty after deciding not to buy licenses for blocks where it didn’t find partners to share drilling costs.

The Ibovespa has gained 11 percent from this year’s low on July 3 as higher commodities prices and a weaker real boosted raw-material exporters. Brazil’s benchmark gauge climbed 5.1 percent in dollar terms during this period, which compares with an advance of 0.4 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 7.4 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.76 billion reais this year through Aug. 23, according to data compiled by the exchange.

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