Brazilian Stocks Post Weekly Decline as Inflation Accelerates

The Ibovespa posted its biggest weekly decline in four months after reports showing faster-than-expected inflation added to concern that a recovery is still not in sight for Latin America’s largest economy. The real strengthened.

The Ibovespa fell 4.1 percent this week, joining losses in emerging markets, as brewer Ambev SA tumbled after a report showed that inflation accelerated more than all analysts forecast in April, tempering bets the central bank will lower interest rates. Stocks also fell after Brazil’s credit grade was cut by Fitch Ratings, which kept a negative outlook on the nation’s debt citing a deeper-than-anticipated recession and political instability.

Brazil’s currency and equities are among the world’s best performers this year on speculation that an impeachment of President Dilma Rousseff amid a graft scandal would pave the way for measures to revive growth. While a political change could usher in economic adjustments and reforms, changes will be hard to implement amid rising unemployment and uncertainty surrounding the stability of the governing coalition, Fitch said on Thursday.

“There’s bad new across the board,” said Paulo Figueiredo, an economist at asset management firm FN Capital in Petropolis, Brazil. “Economic indicators show that Brazil’s situation is worse than we wanted to believe, just as Fitch indicated yesterday.”

The Ibovespa rose less than 0.1 percent to 51,717.82 on Friday as Ambev lost 1.6 percent. The real rose 0.9 percent to 3.5019 per U.S. dollar, paring this week’s decline to 2 percent, as an advance in commodities improved the outlook for Brazilian exports. Swap rates on the contract maturing in January 2018, a gauge of expectations for interest rates, rose 0.02 percentage point to 12.8 percent.

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, Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Rita Nazareth, Sebastian Boyd