Bloomberg News

Bovespa Snaps Five-Day Drop as Rate Bets Bolsters Pao de Acucar

November 25, 2011

Nov. 24 (Bloomberg) -- The Bovespa stock index rose for the first day in six sessions as retailer Cia. Brasileira de Distribuicao Grupo Pao de Acucar rallied after President Dilma Rousseff signaled the country will use interest-rate cuts to help shore up economic growth amid the global slowdown.

Pao de Acucar, Brazil’s biggest retailer, advanced the most in five months as yields on interest-rate futures contracts tumbled. The MSCI Brazil/Consumer Discretionary Index jumped the most among 10 industry groups. Gains on the Bovespa were limited as Usinas Siderurgicas de Minas Gerais SA fell, following metal prices lower.

Brazil’s benchmark equity gauge climbed 0.6 percent to 55,279.88 at the close of trading in Sao Paulo after earlier tumbling as much as 0.8 percent. Forty-four stocks advanced on the index, while 19 fell. The real weakened 1.7 percent to 1.8980 per U.S. dollar.

Brazil has “space to use monetary policy” to combat the effects of Europe’s debt crisis, Rousseff said late yesterday at an event in Brasilia. Latin America’s biggest economy expanded at the slowest pace in 10 quarters in the three months through September, according to an estimate the Finance Ministry gave to Congress.

“We expect policy makers to accelerate rate cuts, as the economy seems to be slowing faster than the government expected,” Gustavo Mendonca, who helps oversee 250 million reais ($133 million) at Rio de Janeiro-based Oren Investimentos, said in a telephone interview.

Rate Outlook

Traders are wagering policy makers will reduce the benchmark rate by as much as 75 basis points, or 0.75 percentage point, to 10.75 percent at their Nov. 30 meeting, followed by about another 100 basis points of cuts by April, yields on interest-rate futures contracts show. Central bankers lowered the rate 50 basis points in each of the past two meetings.

Yields on the futures contract due in January 2013 slid 14 basis points to 9.76 percent.

Pao de Acucar gained 5.6 percent to 62.89 reais, the most since Jun. 28.

Industrial metals declined after German Chancellor Angela Merkel said she remains opposed to common euro-area debt sales. German bunds fell a second day, and Portugal’s debt sank as Fitch Ratings cut its credit grade.

Usiminas, as Usinas Siderurgicas is known, tumbled 3.5 percent to 10.51 reais. The Bloomberg Base Metals 3-Month Price Commodity Index lost 0.4 percent.

Bull Market

The Bovespa entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as the rate cuts and speculation Europe was working toward solving its debt crisis buoyed demand for equities. The index since pared its advance to 14 percent.

Brazil’s benchmark trades at 10.2 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s gauge of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 3 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average this year of 6.54 billion reais through Nov. 21, according to data from the exchange.

--Editors: Marie-France Han, Brendan Walsh

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 at papadopoulos@bloomberg.net


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