Bloomberg News

Bovespa Gains as Brazil Retail Sales Drop Signals More Rate Cuts

October 11, 2011

Oct. 11 (Bloomberg) -- The Bovespa stock index climbed to a two-week high as homebuilders and consumer stocks gained after Brazil retail sales declined more than forecast, signaling the central bank may continue to cut interest rates.

Consumer goods company Hypermarcas SA led gains by stocks that depend on domestic demand. PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder by revenue, reached its highest price in three weeks. OGX Petroleo & Gas Participacoes SA rose after Brazilian billionaire Eike Batista increased his stake to 62.5 percent from 61 percent, according to the oil company’s press office.

The Bovespa rose 1.1 percent to 53,838.47 at the close of trading. Forty-one stocks gained on the index, while 24 fell. The real weakened 0.1 percent to 1.7645 per U.S. dollar.

“Retail sales were lower than expected,” Marcio Cardoso, a partner at Titulo Corretora de Valores, said in a telephone interview from Sao Paulo. “The central bank is trying to avoid a steep economic slowdown, so it’ll probably keep cutting interest rates. But volatility will remain high until the crisis in Europe is solved.”

Retail sales in Brazil fell 0.4 percent in August from a month earlier, the national statistics agency said in Rio de Janeiro. Sales were forecast to decline 0.1 percent, according to the median estimate in a Bloomberg survey of 34 economists. Sales rose 6.2 percent from a year ago, trailing a median estimate of 6.9 percent.

Yields on most Brazilian interest-rate futures contracts fell after the report was released. Yields on the contract due in January 2013, the most traded today in Sao Paulo, declined three basis points, or 0.03 percentage point, to 10.46 percent.

Hypermarcas, OGX

Hypermarcas advanced 2.9 percent to 8.39 reais. PDG Realty jumped 3.7 percent to 6.79 reais, the highest since Sept. 19. OGX rose 3.1 percent to 12.29 reais.

The Bovespa earlier fell as much as 0.9 percent, swinging between gains and losses at least nine times during the first 90 minutes of trading, after European Central Bank President Jean- Claude Trichet warned of threats to the financial system as the conflict among political leaders intensified over how to extricate Europe from the debt crisis.

The Bovespa entered a bear market in July after plunging 20 percent from its 2010 bull-market peak. The measure has since extended that drop to 26 percent and trades at 8.9 times analysts’ earnings estimates, weekly data compiled by Bloomberg show. That compares to a ratio of 9.5 for MSCI Inc.’s gauge of 21 developing nations’ equities.

Traders moved 6.34 billion reais ($3.6 billion) in stocks in Sao Paulo today, compared with a daily average this year of 6.3 billion reais, data compiled by Bloomberg show.

--Editors: Richard Richtmyer, Glenn J. Kalinoski

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos in New York at papadopoulos@bloomberg.net


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