Brazilian Stocks Decline Most in World on Credit Downgrade Fears

  • Government plans to reduce country's fiscal target for 2016
  • Finance Minister Joaquim Levy reported to plan leaving office

Brazil’s stocks fell the most among major global benchmarks on concern the country may be cut to junk by a second credit-rating company because of government plans to loosen its fiscal policy.

Finance Minister Joaquim Levy and President Dilma Rousseff have already agreed that he will leave the government after the president decided to reduce the target for a budget surplus before interest payments in 2016, Valor Economico columnist Claudia Safatle wrote in the newspaper. Moody’s Investors Service has said it may cut Brazil to junk, following a similar decision by Standard and Poor’s in September.

"The possibility of a downgrade has been scaring investors for a long time as the market watches Brazil’s situation deteriorate day after day," Paulo Henrique Amantea, an analyst at brokerage H.H. Picchioni, said from Belo Horizonte. "There are no prospects for improvements in sight. No way a investor will put money here with so many uncertainties."

Banks Itau Unibanco Holding SA and Banco Bradesco SA contributed the most to the gauge’s decline. State-controlled oil producer Petroleo Brasileiro SA also slumped.

The Ibovespa retreated 0.9 percent to 44,478.28 at 10:47 a.m. in Sao Paulo as 50 of its 63 stocks fell. Itau lost 1.6 percent and Bradesco retreated 1.5 percent. Petrobras, as Petroleo Brasileiro is known, dropped 1.3 percent.

The Ibovespa has fallen 23 percent from this year’s peak in May. A political crisis fueled by a widening corruption scandal that has entangled Petrobras and the nation’s biggest builders prevented the government from getting support to measures including expenses costs and tax raises.

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