Brazilian stocks closed lower on Friday, as unexpected good news on the US labour market sparked worries of potential interest rate hikes sooner than previously anticipated. The benchmark Bovespa index dropped 1.04 percent to 67,603.52, reversing gains from earlier in the day.
Data from the United States showed employers there cut far fewer jobs than expected in November, suggesting the labour market in the world's biggest economy might be pulling out of its long dive. "The numbers were quite surprising," said Jankiel Santos, chief economist for BES Investimento.
But early optimism prompted by the data soon gave way to fears that a swifter recovery in the United States would lead the Federal Reserve to raise interest rates earlier. Near-zero interest rates in the United States have fed carry trades, in which investors borrow in low-cost currencies to invest in higher-yielding markets.
Brazil has been a major beneficiary of that flow of money. The Bovespa index has surged about 80 percent so far this year, and the currency, the real, has firmed 35 percent. On Friday, however, the real weakened 1.1 percent to 1.728 per dollar. "There's now this concern that reversal of easy monetary policy (in the United States) could be coming sooner," said Joao Pedro Ribeiro, an analyst with Tendencias consultancy.
The US dollar gained against a basket of major currencies on those fears. The stronger greenback, in turn, pressured the 19-commodity Reuters-Jefferies index down 0.97 percent. The Bovespa index includes a number of companies tied to trade in raw materials, among them Petrobras and Vale, the index's two biggest stocks. State-controlled energy giant Petrobras lost 2.29 percent to 38.40 reais as crude oil settled down 1.29 percent.
Mining company Vale, the world's largest producer of iron ore, sank 2.25 percent to 41.35 reais. But shares of Grupo Pao de Acucar, Brazil's largest retailer, jumped on news that the company is acquiring a controlling share in a rival to expand its home appliance business.
Pao de Acucar climbed 9.73 percent to 62.49 reais as it announced on Friday that it was buying Casas Bahia, in an expansion that would help fuel the company's goal to operate in every state in Brazil. "This would be a super consolidation," said Januario Hostin Jr, an analyst with Leme Investimentos. "There should be a number of gains of scale" as the companies come together.
The purchase could have long-term effects, too, said Dany Rappaport, a partner at InvestPort, a Sao Paulo-based asset management company. "This deal leaves it clear that there's confidence in Brazil's domestic market," he said. "There are a lot of people who are now becoming consumers." Shares of Globex, Pao de Acucar's home appliance unit, surged 28.36 percent to 18.60 reais