Brazil’s Stocks Fall as Fed Concern and Commodities Drop Collide

  • Boston Fed president fuels speculation over rate increase
  • Petrobras follows crude decline as supply agreement questioned

The Slow Unraveling of Brazil, Explained in Two Minutes

The Ibovespa trimmed a weekly advance as Petroleo Brasileiro SA followed a drop in crude prices and comments by a Federal Reserve president fueled concern that interest rates in the U.S. may rise sooner than previously expected.

Petrobras, as the state-controlled oil producer is known, contributed the most to the benchmark equity index’s decline. Crude slumped as Saudi Arabia isn’t anticipating any decision to be made about supplies in talks in Algiers next week, according to an OPEC delegate familiar with the country’s policy. Education groups Kroton Educational SA and Estacio Participacoes SA were also among the worst performers on the gauge.

Brazilian stocks joined global declines Friday after Fed Bank of Boston President Eric Rosengren said the U.S. central bank’s failure to get back to a strategy of gradual rate increases may threaten the ongoing U.S. economic recovery. As odds of a hike in November rose to 21 percent from 19 percent Thursday, optimism that massive foreign inflows will continue supporting the rebound of Latin America’s biggest economy from recession lost steam.

"The Fed is like an ax over our heads," Paulo Henrique Amantea, an analyst at the brokerage Guide Investimentos, said from Belo Horizonte. "The rate increase in the U.S. would be a blow for Brazilian stocks. The uncertainties regarding commodity prices make investors more cautious too."

The Ibovespa fell 0.5 percent to 58,697 at the close of trading in Sao Paulo, trimming its weekly advance to 2.8 percent. Thirty-three of its 58 stocks declined Friday. Petrobras lost 2.2 percent as oil posted the biggest decline since July 13. Estacio dropped 4.2 percent and Kroton declined 4.9 percent.

Pulp producers Fibria Celulose SA and Suzano Papel e Celulose SA surged after Itau Unibanco Holding SA recommended buying both stocks. Analysts at Itau led by Marcos Assumpcao see limited room for declines in pulp prices and also lower risk of further gains for the real. The Brazilian currency weakened 0.7 percent.

Before it's here, it's on the Bloomberg Terminal.