Ibovespa Falls to Six-Year Low as Petrobras Follows Crude's Drop

  • Oil slumps as Iran to increase output after sanctions lifted
  • Commodity exporters gain after China supported currency

Brazil’s stocks fell to a six-year low as state-controlled oil producer Petroleo Brasileiro SA followed a decline in crude after the lifting of international sanctions on Iran.

Petrobras, as Petroleo Brasileiro is known, slumped to the lowest in 13 years as the 40 percent drop in oil prices over the past year dimmed its profit outlook. The producer’s decline offset a gain in raw-materials companies including steelmaker Usinas Siderurgicas de Minas Gerais SA after China stepped up efforts to curb bearish bets on the exchange rate, easing concern that a devaluation of the currency would hurt commodity exporters.

Petrobras, which accounts for about 6 percent of the Ibovespa weighting, announced last week that it will cut spending plans as it reduced estimates for its production growth. The company is planning to sell assets amid a corruption scandal that entangled former executives, politicians and the country’s biggest builders.

"Petrobras’s decline is weighing on the Ibovespa," Luis Gustavo Pereira, an analyst at the brokerage Guide Investimentos, said from Sao Paulo. "As crude drops, prospects for the company, which was once the most important in Brazil, remain very negative."

The Ibovespa fell 1.6 percent to 37,937.27 at the close of trading in Sao Paulo, reaching the lowest level since March 2009. Forty-six stocks fell on the index and 10 rose. Petrobras lost 7.2 percent to 4.80 reais. West Texas Intermediate crude for February delivery dropped 1.6 percent to $28.94 a barrel. Iran plans to boost exports by 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday.

While Petrobras dragged the Ibovespa down, the steelmaker known as Usiminas gained 6.3 percent to 1.02 reais, and rival Cia. Siderurgica Nacional SA rose 1 percent to 3.20 reais. The Bloomberg Base Metals 3-Month Price Commodity Index added 1 percent.

Trading volume on Ibovespa stocks was 40 percent below 10-day average for this time of the day, according to data compiled by Bloomberg, because of the holiday in the U.S. Foreign investors account for about 53 percent of stock trading in Brazil, data compiled by the exchange show.

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