Ibovespa Falls as Surprise Brazil Retail Sales Drop Sinks Natura

The Ibovespa declined the most in a week after a report that showed retail sales in Brazil unexpectedly decreased in December added to concern that growth is faltering in Latin America’s largest economy.

Banco do Brasil SA, the nation’s biggest bank by assets, led losses on the gauge after posting fourth-quarter earnings that missed estimates. Real-estate companies Gafisa SA and Brookfield Incorporacoes SA plunged. Cosmetics seller Natura Cosmeticos SA fell the most among retailers.

The Ibovespa dropped 0.8 percent to 47,812.83 at the close of trading in Sao Paulo, the most since Feb. 3. The real appreciated 1 percent to 2.4016 per U.S. dollar at 5:22 p.m. local time. Brazil’s retail sales fell 0.2 percent in December from a month earlier, the national statistics agency reported. The median forecast of economists surveyed by Bloomberg was for 0.3 percent growth.

“Economic data keep getting worse,” Alvaro Bandeira, a partner at Orama Asset Management, said in a telephone interview from Rio de Janeiro. “If this trend continues, equities won’t have much chance to rebound.”

Banco do Brasil retreated 4.9 percent to 20.82 reais, the most since November. The Brasilia-based bank posted adjusted net income of 2.42 billion reais in the three months ended in December, missing the average estimate of 2.53 billion reais among 11 analysts surveyed by Bloomberg.

Gafisa lost 3.7 percent to 3.16 reais. Brookfield slid 4.1 percent to 1.18 reais. Natura fell 4.1 percent to 36.77 reais even after reporting earnings that beat analysts’ forecasts.

Embraer Rally

Embraer SA gained 2.4 percent to 20.12 reais after receiving a $2.9 billion order for 25 planes from India’s Air Costa. The carrier also has an option to purchase 50 other planes, which may extend the deal’s value to $5.88 billion.

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.

While some stocks may start to look attractive after recent losses, it’s probably too soon to say that Brazilian equities have reached a bottom, according to Oliver Leyland, a portfolio manager at Mirae Asset Global Investments.

“We’re seeing some value emerging, but it’s very hard to call the inflection point,” Leyland said in a phone interview from New York. “Inflation is above what it needs to be, and rates, as a consequence, go up. This scenario is negative to equities.”

Brazil’s shorter-term swap rates climbed after Carlos Hamilton, the central bank economic policy director, said at an event in Curitiba that inflation is still showing resistance.

Trading volume of stocks in Sao Paulo today was 5.94 billion reais, data compiled by Bloomberg show. That compares with a daily average of 6.55 billion reais this year, according to data from the exchange.

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