The Bovespa stock index declined, paring a second monthly gain, as power utilities tumbled on speculation Brazil’s government will for companies to reduce electricity prices, curbing their profits.
Cia. de Transmissao de Energia Eletrica Paulista and Centrais Eletricas Brasileiras SA (ELET6) were the biggest losers on the gauge after President Dilma Rousseff said she will announce next week measures to reduce energy costs for manufacturers as part of efforts to shore up growth. Iron-ore producer Vale SA (VALE3) followed metals higher after Federal Reserve Chairman Ben S. Bernanke said he wouldn’t rule out more stimulus.
The Bovespa slid 0.3 percent to 57,061.45 at the close of trading in Sao Paulo, paring this month’s advance to 1.7 percent. The real was up 1 percent to 2.0282 per U.S. dollar. The MSCI Brazil/Utilities index was the worst performer among 10 industry groups.
“People buy utilities because they don’t like surprises,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview. “With the government signaling changes in the industry, people get scared. The problem is that no one knows for sure what next week’s measures will be like.”
The outlook for lower rates led Banco Itau BBA SA to cut its recommendation on Eletrobras, Cteep and Cia. Energetica de Sao Paulo to the equivalent of sell.
Cteep, as Transmissao Paulista is also known, plunged 9.9 percent to 45.10 reais, extending this week’s slump to 21 percent, the biggest on the Bovespa index. Cia. Energetica, or Cesp, sank 6.7 percent to 31.45 reais. Eletrobras declined 1.6 percent to 18.55 reais.
Vale rose 2.7 percent to 33.18 reais.
The Bovespa earlier gained as much as 1 percent as stocks linked to Brazil’s domestic consumption advanced after a report showed the economy expanded at the fastest pace in a year in the second quarter.
Online retailer B2W Cia. Global do Varejo added 2.2 percent to 7.97 reais after earlier jumping as much as 5.8 percent.
Brazil’s gross domestic product expanded 0.4 percent from the previous three months, the national statistics agency said today. That compares with a median forecast of 0.5 percent growth among 51 analysts surveyed by Bloomberg.
“Second-quarter GDP figures are in line with what we expect for the year, which is a stronger recovery in the third and fourth quarters, driven by all the stimulus measures currently in place,” Joao Pedro Brugger, who helps oversee 220 million reais ($109 million) at Leme Investimentos in Florianopolis, Brazil, said by phone from Sao Paulo.
The Bovespa has climbed 8.7 percent from this year’s low on June 5 as eased concern about Europe’s crisis and borrowing costs at a record low in Brazil boosted demand for equities. The index trades at 11.6 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 10.8 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume was 10.2 billion reais in stocks in Sao Paulo, data compiled by Bloomberg show. That compares with a daily average of 7.17 billion reais this year through Aug. 30, according to data compiled by the exchange.
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