Bloomberg News

Bovespa Index Declines as Greek Default Swaps Move Renews Europe Concern

March 09, 2012

The Bovespa index fell, reversing an earlier gain, as a ruling that Greece’s debt restructuring will trigger default insurance payments stoked concern that a deepening Europe crisis will reduce demand for Brazilian stocks.

Sul America SA (SULA11), a Brazilian insurer, fell to the lowest since Feb. 27 after Barclays Capital cut its recommendation to the equivalent of sell. Cia. de Bebidas das Americas, Latin America’s largest brewer, and other consumer stocks limited the benchmark’s decline, rising on speculation policy makers will continue to cut borrowing costs at an accelerated pace.

The Bovespa fell 0.3 percent to 66,703.96 at the close in Sao Paulo. Thirty-three stocks gained on the measure, while 34 fell. The gauge reversed an earlier gain of as much as 0.8 percent after the International Swaps and Derivatives Association Inc. said Greece’s use of collective action clauses forcing investors to take losses under the restructuring will trigger payouts on $3 billion of default insurance.

“For Greece, the debt restructuring was crucial, but for creditors it was a default,” Joao Pedro Brugger, a portfolio manager at Leme Investimentos in Florianopolis, Brazil, said in a phone interview. “For Brazil, the main downside risk is the uncertainties in Europe, which could increase risk aversion around the world, hurting the Bovespa.”

The benchmark’s decline today extended the weekly drop to 1.6 percent.

Sul America slid 2.9 percent to 17.45 reais. AmBev, as Cia. de Bebidas is known, gained 2.3 percent to 73.67 reais, the best performer on the MSCI Brazil/Consumer Staples Index, which advanced 0.9 percent.

Brazil Inflation

The Bovespa earlier gained as much as 0.8 percent, led by consumer stocks, after a report showed consumer prices in Brazil, as measured by the benchmark IPCA index, rose 0.45 percent in February, after a 0.56 percent increase in the previous month. Last month’s result matched the median estimate of 51 analysts surveyed by Bloomberg.

The yield on the Brazilian interest-rate futures contract due in January 2014 fell seven basis points, or 0.07 percentage point, to 9.23 percent.

The Bovespa has advanced 18 percent this year after slumping 18 percent in 2011, buoyed by Brazil’s interest-rate cuts, renewed optimism Europe may be closer to solving its debt crisis and signs of growth in the U.S. Today is the third anniversary of the 2009 bear-market low for the Standard & Poor’s 500 index. Since then the U.S. gauge has risen 103 percent, while Brazil’s benchmark gauge has gained 82 percent.

Traders moved 6.55 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.22 billion reais this year through March 1, according to data from the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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