Ibovespa Declines Third Day as Itau Slumps on Economic Forecast

The Ibovespa declined for a third straight day as estimates that Brazil will contract further this year dimmed the outlook for companies that depend on domestic demand.

Lender Itau Unibanco Holding SA contributed the most to the gauge’s drop. State-controlled oil producer Petroleo Brasileiro SA advanced after approving financing of 4.5 billion reais ($1.5 billion) with Banco do Brasil SA.

The Ibovespa fell 0.4 percent to 53,761.27 at the close of trading in Sao Paulo as 39 of its 68 stocks retreated. Economists covering the country forecast that Brazil will contract 1.03 percent in 2015, according to a weekly survey by the central bank with 100 analysts. That compares with an estimate for a contraction of 1.01 percent in the previous report.

“It’s very discouraging that the economy will probably do so poorly this year,” Luiz Roberto Monteiro, a trader at brokerage firm Renascenca DTVM in Sao Paulo.

Itau lost 1.7 percent to 35.90 reais, its biggest drop since April 9. Petrobras, as Petroleo Brasileiro is known, climbed 0.6 percent to 13.09 reais.

The Ibovespa had risen as much as 0.8 percent earlier today after Chinese stimulus measures fueled optimism that Brazil’s exporters will benefit from growth in the nation’s biggest trading partner.

“China’s government is taking action, and it would be great if the country could keep its growth pace,” Alvaro Bandeira, a partner at Orama Asset Management, which oversees 248 million reais, in Rio de Janeiro, said in a telephone interview.

China’s reserve-requirement ratio was lowered 1 percentage point. The cut will allow banks to boost lending by about 1.2 trillion yuan ($194 billion). Iron ore miner Vale SA, whose main exports destiny is China, rose 0.3 percent to 14.99 percent.

Options on Brazilian stocks expired today. Trading volume of equities in Sao Paulo was 5.76 billion reais on Monday, data compiled by Bloomberg show. That compares with a daily average of 6.77 billion reais this year through Friday, according to the exchange.

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