Ibovespa Drops With Banks as Unrest Seen Hurting Budget EffortNey Hayashi
The Ibovespa snapped a three-day rally amid concern that Brazil’s political turmoil will make it harder for the government to implement measures needed to cut the budget deficit and preserve the country’s investment-grade status.
Banco do Brasil SA fell the most in two weeks, leading a drop in financial shares. State-run oil company Petroleo Brasileiro SA followed crude lower. Homebuilder Rossi Residencial SA plunged after posting a fourth-quarter loss.
The Ibovespa slipped 1.1 percent to 50,953.53 at the close of trading in Sao Paulo as 46 of its 68 stocks retreated. A Datafolha poll published by newspaper Folha de S.Paulo showed President Dilma Rousseff’s approval rating fell to a record 13 percent after more than 1 million people protested against the government Sunday in cities throughout Brazil.
“The political developments are extremely important because they have a direct impact on the government’s ability to pass legislation needed for the fiscal adjustment,” Ignacio Crespo, an economist at Guide Investimentos SA brokerage, said by phone from Sao Paulo. “Risk aversion is on the rise, and the political outlook is one of the reasons.”
State-run Banco do Brasil lost 4.5 percent to 22.97 reais. Petrobras, as Petroleo Brasileiro is known, retreated 4 percent to 8.90 reais. Rossi dropped 16 percent to 2.80 reais.
Education Minister Cid Gomes resigned Wednesday, becoming the first member of Rousseff’s cabinet to leave office during her second term, after saying during a congressional hearing that lawmakers are taking advantage of the administration when it’s weak.
Growing social and political unrest in Brazil may “further complicate government efforts to restore investor confidence and achieve fiscal consolidation,” Moody’s Investors Service analyst Mauro Leos wrote in a research note. Moody’s, which rates Brazil at the second-lowest level of investment grade, cited a stalled economy and fiscal challenges when it put Brazil on negative outlook in September.
Gross domestic product will contract 2 percent this year, Bradesco BBI economists wrote in a research report. That compares with a previous forecast of a 0.7 percent decline.
The benchmark stock index entered a bear market Dec. 12 after falling 22 percent from last year’s high in September.