Ibovespa Falls to Two-Week Low as Oil Drop Punishes Petrobras

  • Raw-material producers among biggest losers on stock benchmark
  • Power utilities Cesp, Copel gain on privatization plans

The Ibovespa fell to the lowest in two weeks as oil giant Petroleo Brasileiro SA’s drop overshadowed a rally by power utilities amid speculation that deals in the industry will pick up.

Petrobras, as Brazil’s state-run giant is known, joined a global oil industry rout as crude slid on data showing U.S. stockpiles rose. Cia. Energetica de Sao Paulo, known as Cesp, surged after saying late Tuesday that the council overseeing the state privatization program recommended the governor resume plans to sell the utility. Cia. Paranaense de Energia, known as Copel, climbed after Reuters reported it may sell a stake in water company Cia. de Saneamento do Parana, or Sanepar.

Brazil’s benchmark stock index has gained 33 percent this year on bets that Acting President Michel Temer will succeed in putting in place a plan to pull the country out of its worst recession in a century. While a recent surge in deals indicates that the reforms announced by the new federal administration are luring investors to local assets, the drop in raw materials from oil to iron ore may endanger Brazil’s rebound.

"The market is hitting the brakes now as there are so many uncertainties regarding the demand for raw materials, which are very important for Brazil’s economy and companies," said Pedro Galdi, a partner at the equity research firm Upside Investor in Sao Paulo.

The Ibovespa fell 0.5 percent to 57,717.88 at the close of trading in Sao Paulo after rising as much as 0.5 percent. Petrobras lost 2.1 percent as the company’s weighting on the local equity index rose to 9.4 percent, the highest since June 2015. Steelmakers Cia. Siderurgica Nacional SA, known as CSN, and Gerdau SA were the worst performers on the equity gauge as the Bloomberg Commodity Index fell 1.2 percent, the most since Aug. 1.

Trading volume of Ibovespa stocks was 12 percent below the 30-day average as investors await for Federal Reserve Chair Janet Yellen’s speech scheduled for the end of the week to provide clearer signals on monetary policy. The impeachment trial of Brazil’s President Dilma Rousseff for allegedly breaking budget laws, at the end of month, is also fueling caution in the local market.

Cesp climbed 11 percent, Copel added 1.9 percent and Sanepar dropped 3.1 percent.

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