Bloomberg News

Bovespa Falls on Commodities Drop, Brazilian Inflation Forecast

February 28, 2012

Feb. 27 (Bloomberg) -- The Bovespa index fell the most in two weeks as lower commodities prices sent Brazilian producers down amid concern Europe’s debt crisis will damp global growth and as economists raised forecasts for inflation.

Oil company OGX Petroleo & Gas Participacoes SA sank to a one-week low as crude prices dropped. Homebuilders Cyrela Brazil Realty SA Empreendimentos e Participacoes and PDG Realty SA Empreendimentos e Participacoes SA led a rout by companies that sell on credit on concern higher inflation forecasts could be a sign that policy makers will have limited room to lower borrowing costs.

The Bovespa slid 1.1 percent to 65,241.49 at the close of trading in Sao Paulo. It was the second-worst performer among major indexes in the Americas. Forty-six stocks declined on the measure, while 22 advanced. The real rose 0.2 percent to 1.7068 per U.S. dollar.

“Concern about Europe’s crisis, which to a certain extent had eased last week, made investors more cautious today,” Fausto Gouveia, who helps manage 250 million reais ($146 million) at Legan Administracao de Recursos, said by phone from Sao Paulo. “Looking a bit further ahead, inflation may rise again” in Brazil, “which could force the central bank to reverse its current policy and increase interest rates.”

The Standard & Poor’s GSCI index of 24 raw materials fell 0.6 percent, with oil retreating for the first time in eight days, after the Group of 20 nations rebuffed calls from euro countries to increase international lending resources, adding to concern that the region’s crisis will slow the global economy.

OGX dropped 2.6 percent to 17.70 reais.

Homebuilders Tumble

Homebuilders plunged after economists covering Brazil increased their 2013 inflation forecast to a record-high 5.11 percent, according to the median forecast in a Feb. 24 central bank survey of about 100 economists published today, up from the previous week’s estimate of 5.02 percent. Brazil targets consumer price increases of 4.5 percent, plus or minus two percentage points.

PDG declined 3.2 percent to 7.22 reais. Cyrela lost 3.2 percent to 17.42 reais. Brookfield Incorporacoes SA sank 3 percent to 6.45 reais. Rising labor costs in Brazil also could hurt the industry’s earnings, said Marcio Cardoso, a partner at Titulo Corretora de Valores, in a phone interview from Sao Paulo. Given this concern, investors may be locking in profits after this year’s rally. The BM&FBovespa Real Estate Index jumped 21 percent this year through last week, while the Bovespa advanced 16 percent in the same period.

Annual Performance

Brazil’s benchmark equity gauge has advanced 15 percent this year, after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, signs of growth in the U.S. and renewed optimism Europe may be closer to solving its debt crisis. The Bovespa trades at 10.6 times analysts’ earnings estimates, compared with a 10.6 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 5.81 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 6.97 billion reais this year through Feb. 13, according to data from the exchange.

--Editors: Richard Richtmyer, Glenn J. Kalinoski

To contact the reporters on this story: Ney Hayashi in Sao Paulo at; Eduardo Thomson in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

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