Ibovespa Falls as Bull Market Rally Seen as Excessive on Economy

The Ibovespa fell for a second straight day, led by Centrais Eletricas Brasileiras SA, as a rally that drove the benchmark gauge to a bull market was considered excessive considering prospects for Brazil’s economy.

Steelmaker Usinas Siderurgicas de Minas Gerais SA followed commodities lower. Baker products manufacturer M. Dias Branco SA was the best performer on the MSCI/Brazil Consumer Staples Index as data showing consumer prices climbed less than forecast bolstered speculation the central bank will limit further increases in borrowing costs before the October election.

The stock index declined 0.6 percent to 53,100.34 at the close of trading in Sao Paulo, trimming a weekly gain to 0.2 percent, as 46 stocks retreated while 24 climbed. The real gained 0.1 percent to 2.2128 per dollar. The Ibovespa entered a bull market on May 7 after completing a 20 percent climb from a low on March 14.

“Nothing has really improved on the Brazilian economy to justify recent gains,” Luiz Morato, a senior trader at the brokerage firm TOV Corretora, said by phone from Sao Paulo. “Presidential election polls that have been showing opposition candidates gaining more support bolstered the Ibovespa in the past days, but 2015 will be a hard year for the country no matter who wins.”

Voting shares of Eletrobras, as Centrais Eletricas is known, slumped 7.6 percent to 6.95 reais. Usiminas, as Usinas Siderurgicas is also known, retreated 1.8 percent to 8.62 reais. The S&P GSCI Index of 24 raw materials dropped 0.4 percent.

Election Poll

The Ibovespa rose as much as 0.4 percent earlier today after a poll showed President Dilma Rousseff’s lead over her main contender narrowed, adding to speculation that she will face a runoff in the election.

Rousseff’s support among voters was little changed at 37 percent compared with 38 percent in April, according to a poll on Folha de S. Paulo’s website today. Backing for Aecio Neves, a senator with the Brazilian Social Democracy Party, increased to 20 percent from 16 percent.

“Polls showing that Dilma may not win the election in the first round are boosting state-controlled companies’ stocks on expectation that a new government would change their management,” Sandro Fernandes, a trader at the brokerage firm Geraldo Correa, said in a phone interview from Belo Horizonte.

Rousseff has seen her popularity battered in polls over the past month amid accelerating inflation and stagnant economic growth. A Sensus survey published by IstoE magazine on May 3 showed she would win 35 percent of the vote, compared with a combined 34.7 percent for Neves and former Pernambuco state Governor Eduardo Campos. A candidate needs to have more than 50 percent of the valid votes to avoid a runoff.

Inflation Report

M. Dias climbed 2.1 percent to 96.50 reais while the consumer index added 0.4 percent.

Inflation decelerated to 0.67 percent last month from 0.92 percent in March, the national statistics agency said today in Rio de Janeiro. That was slower than the 0.79 median forecast from 45 analysts surveyed by Bloomberg. Annual inflation quickened to 6.28 percent from 6.15 percent, marking its fastest rate since June.

Trading volume of stocks in Sao Paulo was 5.54 billion reais today, data compiled by Bloomberg show. That compares with a daily average of 6.8 billion reais this year, according to data from the exchange.

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