Brazilian stocks fell for the first time in three days as homebuilders dropped on speculation policy makers will slow the pace of interest-rate cuts and oil producers followed crude lower.
OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, retreated from a one- week high. PDG Realty SA Empreendimentos & Participacoes led declines by real estate companies as yields on interest-rate futures contracts advanced after the central bank said it will reduce the amount of money banks must hold in reserve so lenders can boost credit for car purchases.
The benchmark Bovespa (IBOV) index declined 2.7 percent to 55,038.75 at the close in Sao Paulo. Forty-nine stocks dropped while 18 advanced. The real weakened 1.7 percent to 2.0778 per U.S. dollar at 5:32 p.m. local time, the lowest in three years.
“With the government acting to stimulate the economy through measures such as lower reserve requirements, there may be less room for further rate cuts,” Joao Pedro Brugger, a portfolio manager at Leme Investimentos in Florianopolis, Brazil, said by phone. “Homebuilders’ sales depend heavily on credit, so this is negative for them, especially considering that the market is still reacting to weaker earnings the industry in general reported in the first quarter.”
PDG Realty Declines
PDG Realty slumped 11 percent to 2.97 reais. Rossi Residencial SA fell 9.3 percent to 5.16 reais, extending this month’s slump to 36 percent, the worst performer on the Bovespa index in the period. In the interest-rate futures market, yields on most contracts climbed after economic stimulus measures were announced. The yield on the contract due in January 2014 increased 25 basis points, or 0.25 percentage point, to 8.44 percent.
As part of a stimulus package announced yesterday, the central bank will free as much as 18 billion reais ($8.6 billion) for auto financing. Taxes on vehicles will also fall, and the state development bank will lower interest rates on some loans. The measures will cost the government 2.7 billion reais between now and Aug. 31, when most of the measures expire.
Banco Santander Brasil SA (BSBR:US) added 0.6 percent to 16.50 reais, leading gains by lenders. OGX lost 9.4 percent to 11.18 reais. Oil for June delivery fell 1 percent to settle at $91.66 a barrel after the Organization for Economic Cooperation and Development said Europe’s debt crisis risks spiraling out of control and damaging the world economy.
“OECD’s remarks show that the state of the world economy is still worrisome,” Luis Gustavo Pereira, an analyst at Futura Corretora, said by phone from Sao Paulo. “The outlook for stocks is still not very bright.”
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, dropped 3.4 percent to 19.71 reais. The producer’s profit is getting squeezed by a weaker real because most of its debt is in dollars and it also has assets abroad, Chief Financial Officer Almir Barbassa said in an interview at the Rio Investors Day event today. The effects of the weaker local currency on Petrobras’s balance sheet may also affect dividend payments, Barbassa said.
The Bovespa entered a bear market on May 17 after tumbling 21 percent from this year’s high on March 13 through that day. The gauge has since pared the drop to 20 percent. Trading volume was 7.45 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.31 billion reais this year through May 21, according to data from the exchange.
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