(Corrects fourth paragraph to say rate increases are negative for the stock market.)
The Ibovespa (IBOV) fell after a report showing Brazilian inflation was higher than forecast rekindled concern that policy makers will maintain the faster pace of interest rate increases established at their last meeting.
Gafisa SA (GFSA3) led declines among homebuilders as the BM&F Bovespa Real Estate Index fell for the first time in three days. Retailer Lojas Americanas SA fell toward a nine-month low. Steelmaker Usinas Siderurgicas de Minas Gerais SA fell the most on the benchmark gauge.
The Ibovespa declined 0.9 percent to 49,944.39 at 11:29 a.m. in Sao Paulo, extending the weekly drop to 3.3 percent. The real weakened 0.7 percent to 2.1351 per dollar and swap rates increased after prices as measured by the IGP-10 index climbed 0.63 percent in June, according to Getulio Vargas Foundation. The median estimate among 22 analysts surveyed by Bloomberg was for a 0.45 percent increase.
“Inflation is really resistant, so the central bank should have to increase rates again, which is negative for the stock market and for Brazilian companies, which have already been struggling amid weak growth,” Pedro Galdi, chief analyst at the Sao Paulo-based brokerage SLW Corretora, said by phone.
The central bank raised the target lending rate by a half-percentage point to 8 percent at its last meeting, surprising most analysts who predicted a quarter-percentage point increase. Latin America’s largest economy expanded 0.6 percent in the first three months of 2013, below estimates of a 0.9 percent expansion.
Gafisa slid 4.5 percent to 3.42 reais. Lojas Americanas fell 1.8 percent to 15.31 reais. Usiminas, as Usinas Siderurgicas is known, dropped 4.4 percent to 8.08 reais.
To contact the reporter on this story: Denyse Godoy in Sao Paulo at email@example.com
To contact the editor responsible for this story: David Papadopoulos at firstname.lastname@example.org