Ibovespa Declines as Economic Concern Offsets Levy Nod

The Ibovespa dropped a second day amid concern the Brazilian economy will remain weak next year even after policy changes that may be carried out by incoming Finance Minister Joaquim Levy.

State-controlled oil producer Petroleo Brasileiro SA contributed most to the benchmark equity gauge’s drop as oil tumbled to a four-year low. Airline Gol Linhas Aereas Inteligentes SA was the best performer on the index.

The Ibovespa fell 0.7 percent to 54,721.32 at the close of trading in Sao Paulo, erasing an earlier advance of 1.8 percent. Trading volume was 44 percent lower than the average in the previous month with U.S. markets closed for a holiday. The real fell 1.1 percent to 2.5286 per U.S. dollar at 5:40 p.m. local time. President Dilma Rousseff appointed Levy, the head of Bradesco’s asset management unit, as finance minister in a bid to avoid losing Brazil’s investment-grade status over slowing growth and a widening budget deficit.

“Levy is a great name, but he’ll probably make some hard adjustments in policies, and that will take time to make the economy recover,” Fausto Gouveia, who helps manage 850 million reais at AZ Legan, said by phone from Sao Paulo. “It’s still early to build positions based on such optimism.”

Brazil’s benchmark stock index has fallen 12 percent from this year’s high in September. The gauge posted on Nov. 21 its biggest weekly rally in five years after reports that Levy was being considered as finance minister.

Petrobras Decline

Petrobras, as Petroleo Brasileiro is known, dropped 4.7 percent to 13.44 reais. Itau Unibanco Holding SA fell 1.5 percent to 38.74 reais. Gol climbed 7.6 percent to 14.56 reais.

Brazil’s gross domestic product rose 0.2 percent in the third quarter over the three previous months, according to the median forecast of economists surveyed by Bloomberg. That compares with a 0.6 percent decline in the previous quarter and a 0.2 percent drop in the first three months of the year. The national statistics agency is scheduled to publish its GDP report at 9 a.m. local time tomorrow.

As Brazil’s treasury secretary, Levy helped implement fiscal changes under Rousseff’s predecessor, Luiz Inacio Lula da Silva. New economic policies will probably be announced next week, a government official familiar with the discussions said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE