Ibovespa Drops From Three-Week High as Rate Outlook Sinks Ambev

The Ibovespa fell from a three-week high as brewer Ambev SA led declines in consumer stocks on speculation that a weakening Brazilian currency will fuel inflation and spur further interest-rate increases.

Consumer-health products manufacturer Hypermarcas SA retreated as the MSCI Brazil/Consumer Staples Index dropped the most among 10 industry groups. Cia. Siderurgica Nacional SA, the steelmaker known as CSN, followed metals higher after a report showed China’s import growth accelerated.

The Ibovespa sank 0.5 percent to 48,216.89 at the close of trading in Sao Paulo, with 45 stocks lower and 25 higher. The real depreciated 1 percent to 2.4244 per U.S. dollar at 5:21 p.m. local time, extending its loss in 2014 to 2.6 percent. Swap rates, an indication of projections for interest-rate moves, climbed on most contracts.

“Swap rates are pricing in concern that, in the long run, inflation will remain far from the government’s target,” Gustavo Mendonca, an economist at Saga Capital, said in a phone interview from Rio de Janeiro. “The outlook for the Ibovespa doesn’t look very promising.”

Ambev fell 2.7 percent to 16.15 reais. Hypermarcas lost 1.3 percent to 15.50 reais. CSN added 1.4 percent to 11.76 reais as the Bloomberg Base Metals 3-Month Price Commodity Index rose 0.9 percent.

The Ibovespa gained as much as 0.4 percent earlier today as electrical utilities rebounded on eased concern that dry weather will crimp hydropower production and hurt profits.

Utilities Gain

BM&FBovespa’s Electrical Energy index of 15 power companies climbed 0.2 percent after falling to the lowest since 2010 last week on speculation that the government will ration electricity as a drought in some parts of Brazil saps reservoirs feeding hydropower-generating dams.

“These rumors about power rationing encourage people to sell, but I don’t think that the lack of rain will have a significant impact on the companies,” Fernando Goes, an analyst at Clear Corretora in Sao Paulo, said in a phone interview. “Besides, just as rains were surprisingly low so far this year, they can be surprisingly high in the next weeks or months. It’s hard to predict. And shares were already trading at low prices before this issue came up.”

Weather Shift

Dam levels in the Southeast and Midwest regions of Brazil fell to 36.7 percent yesterday from 37.2 percent a day earlier, according to a report from the country’s power-grid operator known as ONS. A heat wave and drought will ease this week as a cold front approaching the south brings showers, Joao Caetano Mancini, a meteorologist at the government’s Inpe weather agency said yesterday.

Cia. Energetica de Minas Gerais gained 4.5 percent to 13.83 reais. Light SA advanced 1 percent to 17.98 reais.

The Ibovespa has tumbled 15 percent from a bull-market high on Oct. 22 as inflation exceeded policy makers’ target and concern mounted that higher government spending will lead to a reduction in the country’s credit rating.

Trading volume of stocks in Sao Paulo today was 8.91 billion reais, data compiled by Bloomberg show. That compares with a daily average of 6.35 billion reais this year, according to data from the exchange.