Ibovespa leads global drops as Petrobras downgraded amid probe

[SAO PAULO] The Ibovespa fell the most among major global equity benchmarks after state-run oil producer Petroleo Brasileiro SA's credit rating was reduced amid the nation's biggest-ever corruption scandal.

Steelmaker Usinas Siderurgicas de Minas Gerais SA dropped for a seventh straight day in the longest stretch of losses since September as newspaper Estado de S. Paulo reported Brazil's antitrust regulator will investigate the company's change of control. Pulp producer Fibria Celulose SA climbed to a two-week high as sales beat analysts' estimates.

The Ibovespa slid 2.2 per cent to 46,696.20 at 11:06 am in Sao Paulo, extending its decrease in January to 6.6 per cent. Moody's Investors Service said Thursday it was cutting all ratings for Petrobras and may lower the producer further because of concern regarding the corruption investigation as well as liquidity pressure that might result from delays in delivering audited financial statements. Petrobras, as the company is known, accounts for about 8 per cent of the Ibovespa's weighting.

"That's terrible news for the company and for Brazilian stocks and bonds in general," Pedro Paulo Silveira, the chief economist at brokerage firm TOV Corretora, said by phone from Sao Paulo. "It only increases the distrust of investors regarding the Brazilian market." Petrobras lost 6.7 per cent to 8.16 reais. Usiminas, as Usinas Siderurgicas is known, fell 4.5 per cent to 3.39 reais, extending its seven-day drop to 17 per cent. Fibria added 0.2 per cent to 31.25 reais.

The Ibovespa entered a bear market December 12 after falling 22 per cent from last year's high in September. Trading volume of equities in Sao Paulo was 6.6 billion reais (US$2.5 billion) Thursday, according to the exchange. That compares with a daily average of 7.3 billion reais in 2014.

BLOOMBERG