Ibovespa Retreats as Brazilian Exporters Decline on Fed Outlook

The Ibovespa fell for the third time in four sessions as Brazilian commodity exporters sank amid speculation the Federal Reserve will soon start reducing U.S. stimulus that has boosted demand for riskier assets.

Gerdau SA dropped the most in five weeks as Credit Suisse Group AG cut its recommendation on the steelmaker to the equivalent of hold. PDG Realty SA Empreendimentos e Participacoes led homebuilders lower. Airline Gol Linhas Aereas Inteligentes SA gained after saying a measure of profitability rose 21 percent in October from a year earlier.

The Ibovespa sank 1 percent to 52,263.51 at the close in Sao Paulo, with 52 of its 72 member stocks lower. The real fell 0.4 percent to 2.2888 per U.S. dollar at 5:24 p.m. local time. The Standard & Poor’s GSCI Index of 24 raw materials dropped 0.2 percent. Minutes of the Fed’s October meeting published Nov. 20 showed officials may cut the $85 billion in monthly bond buying “in the coming months” if the economy improves.

“Everybody’s trying to figure out what the Fed’s next steps will be, and investors are still reacting to what was said in last week’s minutes,” Alvaro Bandeira, a partner at Orama Asset Management, said in a telephone interview from Rio de Janeiro. “In the long term, less stimulus should be seen as a sign that the U.S. economy can stand on its own legs, which is positive. In the short term, however, stocks suffer from concern that liquidity will shrink.”

Gerdau fell 3.1 percent to 17.64 reais. PDG declined 2.3 percent to 1.72 reais. Gol added 3.7 percent to 10.19 reais.

Demand for Brazilian stocks is being damped by concern that the economic recovery will take longer to pick up, JPMorgan Chase & Co. analysts wrote in a report on the outlook for emerging-market equities in 2014.

Growth Outlook

Latin America’s largest economy will grow 2.5 percent this year, according to a central bank survey of about 100 economists published today.

“We would want to see domestic improvement to revisit our current stance on Brazil,” JPMorgan analysts including Adrian Mowat wrote in the research note. The bank in July cut its rating on Brazilian stocks to the equivalent of sell, citing a slowdown in China, the Latin American country’s top export market.

Banco do Brasil SA fell 2.6 percent to 24 reais, leading financial stocks lower. The central bank said on Nov. 22 that Brazilian lenders may have to spend 149 billion reais if the country’s Supreme Court supports consumers seeking to recover deposits lost in an economic overhaul more than two decades ago.

The Ibovespa entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 23 percent in dollar terms this year, compared with a decline of 4.2 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 5.67 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.55 billion reais this year through Nov. 22, according to the latest data available from the exchange.

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