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Brazil’s stocks fall as Fed concern adds to local economic woes

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(Bloomberg) – Brazil’s Ibovespa joined a global rout Thursday as material producers including miner Vale SA and oil giant Petroleo Brasileiro SA slumped on concern that the Federal Reserve may start raising interest rates as soon as next month, prompting investors to pare bets in riskier markets.

Brazil’s benchmark equity gauge fell for a fifth straight day. Petrobras, as Petroleo Brasileiro is known, contributed the most to the index’s drop, and Vale declined to the lowest price since April 7. Commodity producers account for 22 percent of the Ibovespa’s weighting.

The flight-to-quality move was rekindled Wednesday after minutes from the Fed’s April meeting indicated policymakers are willing to increase rates in June if the economy continues to improve. That’s bad news, especially for Brazil, where a new government took office last week with the job of shoring up the country’s finances and fighting a recession.

“The global risk aversion gets a boost in Brazil because there are still a lot of uncertainties regarding the prospects for the Brazilian economy,” Paulo Henrique Amantea, an analyst at brokerage Guide Investimentos, said from Belo Horizonte, Brazil.

The Ibovespa fell 0.9 percent to 50,121.35 at 10:45 a.m. in Sao Paulo as 43 of its 59 stocks declined. Vale dropped 3 percent and Petrobras lost 2.4 percent.