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Nov. 26 (Bloomberg) -- Brazilian stocks fell the most in two weeks and the currency tumbled after inflation accelerated and Dubai’s attempt to reschedule its debt rattled investors seeking higher returns in emerging markets.
Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, led declines on the Bovespa index as investors boosted their bets for bigger interest-rate increases next year. Vale SA, the world’s biggest iron-ore miner, and smaller rival MMX Mineracao & Metalicos SA dropped more than 2 percent as metals prices fell after government investment company Dubai World sought to delay repayment on much of its debt.
“Everyone remembers the serious problem we had last year, and we don’t still know the real size of this thing. It could be nothing or it could be the beginning of something else that is just starting to appear,” said Guilherme Sand, who helps manage the equivalent of $400 million at Solidus Brokerage in Porto Alegre, Brazil. “And in light of that doubt investors are selling and retreating to the dollar.”
The Bovespa lost 2.3 percent to 66,391.80. The real fell the most this month, losing 1.4 percent to 1.7469 per dollar. The U.S. currency gained today against 15 of the 16 major currencies tracked by Bloomberg.
In other Latin American markets, Argentina’s Merval fell 4.3 percent and Chile’s Ipsa slid 2.1 percent. Mexico’s Bolsa index and the MSCI Emerging Markets index lost 2.2 percent.
Dubai World, with $59 billion of liabilities, roiled markets around the world. Moody’s Investors Service and Standard & Poor’s cut the ratings on state companies yesterday, saying they may consider state-controlled Dubai World’s plan to delay debt payments a default.
‘Dimension’
Europe’s Dow Jones Stoxx 600 Index retreated 3.2 percent while the Shanghai Composite Index slumped 3.6 percent, its biggest drop since August. U.S. markets are closed for the Thanksgiving holiday.
“The dimension of the thing starts to appear today as banks in Europe and in other places that were creditors start looking into possible problems” resulting from a default, said Alvaro Bandeira, director of Rio de Janeiro-based Agora Corretora, Brazil’s second-biggest brokerage.
Vale dropped 2.1 percent to 42.48 reais. Copper paced metal declines in London on speculation rising stockpiles and a rebound in the dollar signal slower demand for the metal. The Bloomberg Base Metals 3-Month Price Commodity Index fell 2.2 percent, the most in November.
MMX, the iron-ore producer controlled by Brazilian billionaire Eike Batista, fell 2.1 percent to 11.94 reais.
Oil Drops
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, fell 2.5 percent to 38.45 reais as oil prices dropped. Crude for January delivery fell as much as 2.5 percent in electronic trading on the New York Mercantile Exchange. Batista’s OGX Petroleo & Gas Participacoes SA fell 2.7 percent to 1,430 reais.
Gerdau SA, Latin America’s biggest steelmaker, slid 2.6 percent to 27.77 reais. Chief Executive Officer Andre Gerdau Johannpeter said it’s too soon to raise prices in the Brazilian market.
Brazilian consumer prices measured by the IPCA-15 index rose 0.44 percent, up from 0.18 percent a month earlier, the national statistics agency said today.
The central bank may need to raise borrowing costs earlier next year than previously forecast as tax cuts fuel consumer spending and threaten inflation targets. The rate currently is at a record-low 8.75 percent.
Policy makers will likely boost rates to 12.75 percent by the end of 2010, according to Bloomberg estimates based on overnight interest-rate-futures contracts. The yield on the contract due January 2011 was up eight basis points, or 0.08 percentage point, to 10.28 percent, according to Bloomberg data.
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Higher rates may damp consumer spending. Lojas Renner declined 4.3 percent to 37.20 reais. Smaller rival Marisa SA dropped 1.4 percent to 9.60 reais. Lojas Americanas SA, the biggest discount retailer, fell 3.3 percent to 13.94 reais.
The real lost as much as 1.7 percent against the dollar. The cost of protecting government debt from Abu Dhabi to Bahrain extended the biggest increase since February as Dubai World sought a “standstill” agreement from creditors.