Most Brazil Stocks Drop as Growth Concerns Blunt CPI Optimism

Most stocks on the Bovespa index fell, following two weekly advances, on concern a slowdown in global growth may damp demand for Brazilian commodity exports, overshadowing lower inflation forecasts.

The Bovespa lost 0.2 percent to 64,211.15 at 9:38 a.m. New York time. Forty-one stocks dropped on the index while 25 rose. The index advanced June 3 after Finance Minister Guido Mantega said the government doesn’t see the need for further measures to curb credit growth. The real lost 0.1 percent to 1.5774 per dollar today.

“The market is going to be ruled by lack of direction and greater volatility,” said Leonardo Boguszewski, who helps oversee 460 million reais ($291.4 million) at JMalucelli Investimentos in Curitiba, Brazil. “We’re taking advantage of these more nebulous moments to build positions.”

Stocks fell for a fourth day in Europe and oil declined on concern the global economic recovery is faltering. Crude futures dropped as much as 1.4 percent in New York.

Economists covering the Brazilian economy cut their forecast for 2011 inflation for a fifth straight week. Consumer prices will rise 6.22 percent this year, according to the median forecast in a June 3 central bank survey of about 100 economists published today. The figure was down from 6.23 percent the previous week. Economists also cut their forecast for monthly inflation in June for a seventh straight week, to 0.1 percent.

Dollar Bonds

Brazilian dollar bonds are beating stocks by the most in nine months as investors bet slowing growth in Latin America’s biggest economy will curb inflation.

The 2.2 percent gain in bonds in May compares with a 2.9 percent loss in the Bovespa in dollar terms, the biggest outperformance since August, according to data compiled by Bloomberg and JPMorgan Chase & Co. The average yield on Brazil’s dollar bonds fell 17 basis points, or 0.17 percentage point, last month to 5.12 percent.

The Bovespa tumbled 12 percent from a November high through last week on concern accelerating inflation will hurt economic growth. 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 12.5 for the Shanghai Composite Index, 6.5 for Russia’s Micex and 14.8 for India’s Sensex.