Ibovespa Posts Back-to-Back Decline as Consumer Stocks Tumble

Updated on
  • Brazil's retail sales trail estimates as Cia Brasileira sinks
  • Benchmark equity gauge trades 17% below average of last decade

The Ibovespa extended its biggest back-to-back slump since December as consumer stocks sank after a report showed retail sales tumbled more than forecast.

The seventh straight decline in retail sales comes as the lowest consumer confidence in more than a decade and rising unemployment keep families from shopping. Brazilians are also coping with the highest interest rates since 2006, aimed at taming above-target inflation. Brazil’s government is working to shore up fiscal accounts, which Finance Minister Joaquim Levy said will help restore demand.

“The economy is still far from a bottom,” Luciano Rostagno, chief strategist at Banco Mizuho do Brasil SA, said by phone from Sao Paulo. “Economic data keep showing that domestic demand is dropping as the labor market weakens and inflation accelerates.”

The Ibovespa dropped 1.4 percent to 46,710.44 at the close of trading in Sao Paulo, extending a two-day decline to 5.3 percent. A measure of consumer stocks in the MSCI extended this year’s slump to 27 percent, led by Cia. Brasileira de Distribuicao.

The benchmark has lost 20 percent from this year’s peak in May as President Dilma Rousseff struggles to shore up the nation’s finances amid talks of her impeachment, an anemic economy and a widening corruption scandal. The gauge’s plunge sent its valuation 17 percent below the average of the last decade, according to data compiled by Bloomberg.

Rousseff has been unable to find support for her initiatives amid an investigation into corruption at the state-controlled oil company that allegedly occurred while she was its chairman, sending her popularity to a record low and generating calls for her ouster. Brazil’s lower house chief suspended a decision whether to start impeachment proceedings as the Supreme Court questioned his guidelines for ousting a president.

“The political story is at the crux of the whole problem” with Brazil’s economy, Pablo Goldberg, an emerging-market money manager and senior debt strategist at BlackRock, said late Tuesday on Bloomberg Television. “It’s difficult to see that we’re going to get the little good things that are happening in Brazil to start to bring the green-shoots you want to see.”