Bloomberg News

Bovespa Index Rises to One-Week High on Oil Advance

December 07, 2011

(Corrects story originally published on Nov. 16 to remove reference to office location in eighth paragraph.)

Nov. 16 (Bloomberg) -- The Bovespa stock index advanced to a one-week high as crude prices jumped and traders added to wagers for lower Brazilian interest rates.

Oil companies OGX Petroleo & Gas Participacoes SA and Petroleo Brasileiro SA contributed the most to the index’s gain. JBS SA, the world’s biggest beef producer, surged to the highest since May after saying it may sell U.S. assets to cut debt. The Bovespa’s advance was limited by an 8.5 percent plunge in homebuilder Gafisa SA after third-quarter profits fell.

The Bovespa rose 0.5 percent to 58,559.99 at the close in Sao Paulo, the highest since Nov. 8. Forty-three stocks rose on the index while 24 fell. The real weakened 0.2 percent to 1.7701 per dollar.

“The reversal in oil is what’s moving the market,” said Mirela Rappaport, who helps manage about 160 million reais ($90.4 million) at Investport in Sao Paulo. “Our view is that the market is cheap. Rates are coming down. It’s bad news out of Europe that’s holding it back.”

Oil in New York climbed above $100 a barrel to a five-month high as Enbridge Inc. said it would reverse the direction of the Seaway pipeline, opening an outlet for crude from the central U.S. and Canada. Crude futures rose 3.1 percent, after falling as much as 1 percent earlier today.

The yield on the Brazilian interest-rate futures contract due in January 2013 dropped one basis point, or 0.01 percentage point, to 9.94 percent, indicating traders expect the central bank to make deeper cuts in borrowing costs.

OGX, JBS

State-controlled Petrobras advanced 0.9 percent to 22.11 reais while billionaire Eike Batista’s OGX gained 1.5 percent to 14.04 reais.

JBS, based in Sao Paulo, may sell idled plants in the U.S. and office buildings that previously belonged to Pilgrim’s Pride, Chief Executive Officer Wesley Batista told analysts today on an earnings conference call. The stock jumped 6.5 percent to 5.75 reais.

The benchmark equity gauge earlier dropped as much as 0.8 percent, led by homebuilders. The BM&FBovespa Real Estate Index lost 1 percent.

Gafisa slumped 52 centavos to 5.60 reais after it said third-quarter net income plunged 60 percent from a year earlier to 46.2 million reais. Gafisa also cut its forecast for new projects this year to a range of 3.5 billion reais to 4 billion reais, from a previous range of 5 billion reais to 5.6 billion reais.

Rival MRV Engenharia & Participacoes SA declined 0.3 percent to 11.11 reais after it reported a third-quarter profit of 216 million reais, down 3.4 percent from a year earlier.

Index Valuation

Brazil’s benchmark equity gauge dropped on Nov. 14 after economists cut their Brazil forecasts amid Europe’s debt turmoil. The market was closed yesterday for a national holiday.

The Bovespa trades at about 10.5 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 3.8 billion reais in stocks in Sao Paulo on Nov. 14, data compiled by Bloomberg show. That compares with a daily average this year of 6.55 billion reais through Nov. 9, according to data from the exchange.

--Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net

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


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