Brazilian Stocks Fall as Investors Focus on U.S. Rate Outlook

  • Riskier assets are becoming less attractive worldwide
  • Credit-card procesor Cielo leads losses on Ibovespa benchmark

Can Temer Revive Growth in Brazil?

The Ibovespa ended its longest weekly winning streak since 2006 as prospects for higher interest rates in the U.S. prompted investors to dump riskier assets, overshadowing progress in efforts to impeach President Dilma Rousseff.

Credit-card processor Cielo SA led losses on the gauge Friday. Brazil stocks joined a rout in the Americas after Federal Reserve Vice Chairman Stanley Fischer said a rate increase is possible in September, contradicting speculation it wouldn’t come until December.

Brazilian stocks have risen 33 percent this year -- and had advanced for 10 consecutive weeks -- on speculation that a new administration led by Acting President Michel Temer would be able to shore up the country’s finances and restore growth. Brazilian assets could become relatively less attractive if rates rise in the U.S., increasing returns from holding dollars.

"There’s a big red flag on the horizon now," Jason Vieira, the chief economist at the brokerage Infinity Asset Management, said from Sao Paulo. "The Fed is beginning to set the market’s mood to a possible rate increase."

The Ibovespa fell 2.3 percent this week, closing Friday little changed at 57,716.25. Miner Vale SA followed iron-ore’s steepest drop since June 14.  

Lenders Itau Unibanco Holding SA and Banco Bradesco SA advanced as Rousseff’s impeachment trial got underway amid allegations she improperly accounted for government finances. A verdict is expected by Aug. 31.

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