Bovespa Stock Index Futures Decline as Economists Cut Brazil GDP Forecasts

Bovespa futures fell, signaling the stock index may snap a five-day rally, amid speculation Brazil’s economic growth is cooling after economists cut their forecasts for gross domestic product expansion.

Cia. Brasileira de Distribuicao Grupo Pao de Acucar may move after Casino Guichard-Perrachon SA filed a second request for arbitration against the Diniz Group, which partly controls the retailer. MPX Energia SA and OSX Brasil SA may be active after Folha de S.Paulo said Eike Batista, their billionaire controller, is negotiating loans with Brazil’s state development bank for loans for the two companies.

Bovespa futures slipped 0.2 percent to 64,110 at 8:12 a.m. New York time. The real weakened 0.2 percent to 1.5590 per dollar. The Bovespa rose July 1, posting its biggest weekly gain in almost a year, after a manufacturing index unexpectedly rose in the U.S. and traders in Brazil pared bets for higher borrowing costs.

“Markets should continue to focus on credit and labor market trends to get a better sense of the monetary policy prospects,” David Beker, an analyst at Bank of America Corp. in Sao Paulo, wrote in a note to clients. “Demand remains strong.”

Traders in 2011 have moved a daily average of 6.47 billion reais ($4.2 billion) in stocks in Brazil, according to the exchange. Volumes are typically lower when U.S. markets are shut, as they are today for Independence Day.
GDP

Economists covering Brazil cut their predictions for 2011 GDP growth for a second straight week. The economy will expand 3.94 percent this year, according to the median forecast in a July 1 central bank survey of about 100 economists published today. That compares to a previous estimate of 3.95 percent.

Economists also cut their estimates for inflation this year and next. Consumer prices will rise 5.10 percent next year, down from a 5.15 percent forecast the previous week. Prices, as measured by the IPCA index, will rise 6.15 percent this year, the survey found, from 6.16 percent previously.

Carrefour SA (CA)’s board approved a plan to merge Brazilian assets with Pao de Acucar, intensifying a battle with rival Casino. Carrefour and Pao de Acucar would each own half of the joint venture, which would achieve annual savings of 600 million euros ($870 million) to 800 million euros, the French retailer said today. Casino says the plan violates a 2005 agreement for it to become Pao de Acucar’s sole controlling shareholder in 2012.
Struggle

The merger plan was proposed to Carrefour last month by Banco BTG Pactual SA investment fund Gama, setting up a power struggle with Casino, which responded by raising its stake in Pao de Acucar to about 43 percent.

Pao de Acucar is willing to negotiate with Brazil’s antitrust regulator, Cade, to win approval for the merger, O Estado de S. Paulo reported, citing Chairman Abilio Diniz.

Batista is negotiating with BNDESPar, a subsidiary of state lender BNDES, to get a 600 million-real loan for energy company MPX and 2.7 billion reais of financing for OSX’s shipyard in Rio de Janeiro state, Folha reported, without saying where it obtained the information.

Two companies scrapped initial public offerings on July 1. Perenco Petroleo & Gas do Brasil Participacoes SA, a unit of French oil company Perenco SA, and Tereos Internacional SA, Brazil’s second-largest sugar and ethanol producer by revenue, both cited market conditions in halting the sales.

The Bovespa is up 1.6 percent since June 30 after losing 10 percent in the first half of 2011. The index trades at 10.2 times analysts’ earnings estimates, near the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 11.2 for MSCI Inc.’s gauge of 21 developing nations’ equities.

Investors pulled 1.38 billion reais from Latin America’s largest equity market in the year through June 27, according to the exchange.