Ibovespa Declines as Brazil Growth Outlook Outweighs Inflation

The Ibovespa dropped the most among major equity benchmarks in the Americas amid below-average volume as projections that Brazil’s economic growth will slow outweighed a smaller-than-forecast increase in consumer prices.

Power utility Eletropaulo Metropolitana SA sank for a third day, while voting shares of phone company Oi SA fell the most on the benchmark gauge. Online retailer B2W Cia. Digital led companies that sell in the domestic market higher. Vale SA, the world’s biggest iron-ore producer, rose after agreeing to sell a 26.5 percent stake in a logistics subsidiary. Oleo e Gas Participacoes SA rallied as founder Eike Batista agreed to cede control of the oil company to creditors.

The Ibovespa declined 0.3 percent to 51,221.01 at the close of trading in Sao Paulo after earlier rising as much as 0.5 percent. Trading volume was 44 percent below the 30-day average. Forty-seven stocks fell on the index while 21 rose. The real appreciated 0.1 percent to 2.3544 per U.S. dollar at 5:26 p.m. local time.

“The market is reflecting this day of low volume,” Joao Pedro Brugger, who helps oversee 400 million reais at Leme Investimentos, said by phone from Florianopolis, Brazil. “The index will be hovering around this level for the rest of the year. For 2014, there’s still concern about the fundamentals of the Brazilian economy, with weak growth and poor fiscal numbers.”

Economists cut their projections for Brazil’s 2014 gross domestic product expansion to 2 percent from 2.01 percent a week earlier, according to a central bank survey released Dec. 23. The forecast for growth this year is 2.3 percent.

Eletropaulo, Oi

Trading volume of stocks in Sao Paulo was 3.77 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 7.46 billion reais this year, according to data available from the exchange.

Eletropaulo fell 4 percent to 10.24 reais. Oi lost 4.4 percent to 3.72 reais.

Consumer prices in Brazil’s seven biggest cities climbed 0.66 percent in the month ended Dec. 22 after rising 0.75 percent in the prior period, the Getulio Vargas Foundation reported today. The median forecast of economists surveyed by Bloomberg was 0.73 percent.

“Recent inflation numbers show that price increases are slowing down, so investors think that the central bank may stop raising its benchmark interest rate,” Raphael Figueredo, an analyst at the brokerage firm Clear Corretora, said by phone from Sao Paulo.

Batista Deal

Policy makers have lifted borrowing costs by 2.75 percentage points to 10 percent since April, the biggest increase among 49 central banks tracked by Bloomberg.

B2W added 2.3 percent to 15.24 reais. Vale rose 0.3 percent to 31.90 reais after agreeing to sell a stake in VLI to Canada’s Brookfield Asset Management Inc. for 2 billion reais.

Oleo e Gas jumped 16 percent to 22 centavos. Batista, the former Brazilian billionaire, said he reached an agreement with creditors to convert $5.8 billion of debt into 90 percent of equity in the oil company. The accord, which includes restructuring dollar bonds, may help the Rio de Janeiro-based explorer emerge from bankruptcy two months after defaulting.

The Ibovespa has declined 27 percent in dollar terms this year, the worst performance among the 20 biggest equity indexes tracked by Bloomberg. The MSCI Emerging Markets Index is down 5.9 percent this year.

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