Brazil’s Stocks, Real Fall on U.S. Election Anxiety, Growth Woes

(Bloomberg) -- Brazil’s stocks fell to a three-week low and the real extended losses for a second day as investors opted for caution ahead of the presidential election in the U.S., Brazil’s second-biggest trading partner.

The benchmark Ibovespa equity index fell 2.5 percent to 61,750.17 Thursday in Sao Paulo, the biggest decline among major stock benchmarks. All of its 58 stocks retreated, led by Petroleo Brasileiro SA, which followed oil’s drop after a record surge in U.S. inventories and OPEC crude production climbed to an all-time high. The real lost 0.3 percent to 3.2420 per dollar, its weakest since Oct. 4.

Brazil’s stocks and currency have climbed the most in the world this year on optimism a new government would help pull the country out of its worst recession in a century. While investors in Latin America’s biggest country are still waiting for solid signals that the local economy is improving, the U.S. election threatens to usher in policies that could harm exports. Recent polls have showed Democrat Hillary Clinton leading Republican Donald Trump in the race for the White House, but the result still seems too close to call.

"It’s very tricky to play Brazilian assets at this moment," Luis Gustavo Pereira, an analyst at brokerage Guide Investimentos, said from Sao Paulo. "Investors will use the wait-and-see approach until the election is over, so we must brace for a lot of volatility in coming days."

After gaining 74 percent in dollar terms this year, the Ibovespa is trading 18 percent above its three-year average valuation on a price-to-earnings basis.

Petrobras, as Petroleo Brasileiro is known, sank 4.3 percent. Holding company Itausa - Investimentos Itau SA fell 2 percent after confirming it’s considering a bid for Petrobras’s fuel distribution unit. Logistics operator Rumo Logistica Operadora Multimodal SA was the worst performer on the index, declining 7.8 percent, as bank Brasil Plural SA withdrew a buy recommendation for the stock on earnings concern. Consumer stocks including clothing retailer Lojas Renner SA, drugstore chain Raia Drogasil SA and cosmetics maker Natura Cosmeticos SA were also among the biggest losers on the stock gauge.

--With assistance from Ney Hayashi To contact the reporters on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net, Paula Sambo in Sao Paulo at psambo@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Jessica Brice, Sebastian Boyd