Brazilian Stocks Decline as Economists Raise Inflation Forecast

The Ibovespa fell for the first time in three sessions as economists surveyed by the central bank forecast that Brazil’s annual inflation will exceed the upper limit of the official target.

PDG Realty SA declined on concern higher borrowing costs will make it harder for the company to sell homes. Cigarette maker Souza Cruz SA sank the most in a week. Vale SA followed iron-ore prices lower. Cia. de Saneamento Basico do Estado de Sao Paulo, Latin America’s biggest water utility, advanced to a two-week high after regulators approved a rate increase that was bigger than previously estimated.

The Ibovespa lost 0.3 percent to 51,976.86 at the close of trading in Sao Paulo, with 37 stocks higher and 34 lower. The real weakened 0.1 percent to 2.2396 per U.S. dollar at 5:30 p.m. local time. Swap rates rose on most contracts as traders speculated that Brazil’s central bank will keep raising interest rates to curb inflation.

“Recent data show that inflation is still on the rise, with the survey showing higher forecasts every week,” Raphael Figueredo, an analyst at the brokerage firm Clear Corretora in Sao Paulo, said in a telephone interview.

Consumer prices in Brazil will increase 6.51 percent this year, according to the median forecast of about 100 economists surveyed by the central bank. That compares with the estimate of 6.47 percent a week earlier and the official target of 4.5 percent plus or minus 2 percentage points.

Souza Cruz dropped 1.8 percent to 22.47 reais. PDG retreated 2.9 percent to 1.35 reais.

Vale sank 1.8 percent to 28.04 reais after India ended a ban on iron ore mining in Goa, spurring Citigroup Inc. to predict that the decision may be bearish on prices.

Sabesp Rallies

Sabesp, as Cia. de Saneamento is known, rose 3.1 percent to 21.55 reais. Sao Paulo state’s water and energy regulator said April 17 that the utility may raise rates by as much as 5.4408 percent starting May 11. The amount exceeded the regulator’s 4.6607 percent estimate given in February.

Cia. Paranaense de Energia increased 2.9 percent to 33.37 reais after Brazil’s power grid operator forecast “slightly higher” flows into reservoirs serving hydroelectric plants. CPFL Energia SA gained 1.7 percent to 19.88 reais.

The Ibovespa entered a bear market March 14 after falling 20 percent from its October high through that day. The gauge has since gained 16 percent as state-owned companies including Centrais Eletricas Brasileiras SA rebounded.

Trading volume of stocks in Sao Paulo today was 6.89 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 6.71 billion reais this year, according to data from the exchange.

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