Ibovespa Falls as Commodity Drop Outweighs Brazil Rate Outlook

The Ibovespa fell for a third day as a drop in commodities sank exporters including iron-ore producer Vale SA, overshadowing gains in consumer stocks after policy makers signaled they may stop raising interest rates.

Pulpmaker Fibria Celulose SA dropped to a 10-month low. Duratex SA, a maker of wood panels and metal fixtures, was the worst performer on the the MSCI Brazil/Materials Index. Tobacco producer Souza Cruz SA rose the most since November 2008.

The Ibovespa retreated 0.1 percent to 51,127.48 at the close of trading in Sao Paulo. The real weakened 0.8 percent to 2.2046 per U.S. dollar at 5:21 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials fell 0.2 percent. Commodity producers account for about one-third of the Ibovespa’s weighting.

“The optimism we saw in the past weeks about global growth and a change in the government in Brazil has diminished a little because we haven’t seen solid data to prove that the positive expectations were right,” Luis Morato, a senior trader at TOV Corretora, said by phone from Sao Paulo.

The Ibovespa has gained 13 percent from this year’s low on March 14.

State-run oil producer Petroleo Brasileiro SA fell 1.1 percent to 15.68 reais today, contributing the most to the benchmark index’s drop. Vale declined 0.9 percent to 29.69 reais. Fibria retreated 1.4 percent to 23.62 reais. Duratex sank 3 percent to 11.50 reais.

Rate Outlook

Some consumer stocks gained after Brazil’s central bank said in minutes of its last monetary policy committee meeting that the effects of recent rate increases have yet to be felt. Swap rates, a gauge of expectations for interest-rate moves, fell on most contracts.

“Reading the minutes, investors are understanding that the central bank has stopped raising rates, which is good for companies and stocks,” Sandro Fernandes, a trader at the brokerage firm Geraldo Correa, said by phone from Belo Horizonte, Brazil.

The monetary authority voted unanimously this month to raise benchmark borrowing costs to 11 percent from 10.75 percent. Policy makers said inflation remains persistent and predicted the recent jump in food prices will be temporary, according to the minutes of the April 1-2 meeting released today. The nine borrowing-cost increases Brazilian policy makers have made since April 2013 are the most among the 49 central banks tracked by Bloomberg.

Souza Cruz gained 6.7 percent to 22.10 reais. Retailer Cia. Hering rose 1.3 percent to 25.10 reais.

Trading volume of stocks in Sao Paulo was 6.48 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 6.62 billion reais this year, according to data from the exchange.

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