Ibovespa Enters Bear Market as Crude Below $58 Sinks Petrobras

The Ibovespa entered a bear market, capping the biggest weekly slump since October, as a decline in crude oil below $58 a barrel sank Petroleo Brasileiro SA.

Petrobras, as the state-run company is known, extended a five-day slide to 18 percent. Itau Unibanco Holding SA, Latin America’s largest bank by market value, contributed the most to the benchmark equity index’s drop. Homebuilder Rossi Residencial SA surged 16 percent after a six-day slump. Cia. Paranaense de Energia, the utility known as Copel, jumped on a plan to invest 2.5 billion reais ($940 million) next year.

The Ibovespa fell 3.7 percent to 48,001.98 at the close of trading in Sao Paulo, bringing its losses from this year’s high to 22 percent. The gauge has dropped 7.7 percent for the week. Brazil’s biggest-ever laundering and corruption case is expanding as authorities step up investigations into executives at construction companies in a case linked to Petrobras. Oil sank to a five-year low to as low as $57.34 a barrel as the International Energy Agency cut its 2015 demand forecast.

“That’s been happening in an already negative moment for Petrobras,” Fernando Goes, an analyst at brokerage firm Clear Corretora, said in a telephone interview from Sao Paulo. “The company’s corruption investigation has prompted investors to seek compensation for their losses.”

The probe threatens to derail President Dilma Rousseff’s efforts to revive growth by undermining investors’ confidence and delaying infrastructure projects. Latin America’s largest economy will expand this year at the slowest pace since a recession in 2009, according to analysts surveyed by Bloomberg.

Leading Losses

While policy makers last week raised the benchmark interest rate to a three-year high to curb inflation, concern the economy will slow further has spurred a rout in equities. Since reaching this year’s high on Sept. 2, the Ibovespa has led losses among the world’s biggest stock markets as Rossi Residencial and Petrobras dropped more than 58 percent.

The iShares MSCI Brazil Capped exchange-traded fund slid 2.6 percent to a five-year low of $35.69 at 3:52 p.m. in New York. It has tumbled 9.2 percent this week.

All 10 groups in the MSCI Brazil Index retreated at least 0.8 percent, led by energy companies. Petrobras fell 6.6 percent to 10.11 reais, the lowest since 2004.

Itau declined 5.3 percent to 33.75 reais, extending this week’s slide to 8.9 percent. Rossi Residencial surged to 2.40 reais after slumping 42 percent over the previous six days. Copel added 3.4 percent to 34.12 reais.

Chinese Data

Equities also fell this week on concern the global economy will falter and curb demand for commodities. Growth in China, Brazil’s largest trading partner, slowed in November as factory shutdowns exacerbated weaker demand, raising pressure on the central bank to add further stimulus.

“To avoid a downturn in the Brazilian economy, macroeconomic adjustments are needed, with limited room for maneuvering,” Ilan Goldfajn, the chief economist of Itau, wrote in a note to clients. “The adjustments must address a less favorable external scenario, limited economic growth, high inflation and the deterioration in the fiscal and external accounts.”

Slowing growth and deteriorating fiscal results led Standard & Poor’s in March to cut the country’s sovereign debt rating to one level above junk. In September, Moody’s Investors Services followed by cutting Brazil’s Baa2 credit rating outlook to negative.

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