Bloomberg News

Bovespa Index Rises to Two-Week High as Rate Outlook Lifts B2W

June 12, 2012

The Bovespa index rose to a two-week high as retailers and homebuilders rallied on speculation Brazilian policy makers will further reduce borrowing costs.

B2W Cia. Global do Varejo led gains by companies that sell in the local market as yields on interest-rate futures contracts declined. Steelmaker Gerdau SA, which generated 38 percent of its 2011 revenue from North America, advanced to a one-month high after a Federal Reserve policy maker said he would support various stimulus measures.

Brazil’s benchmark equity measure gained 1.9 percent to 55,049.03 at the close in Sao Paulo. Sixty-three stocks rose on the measure while four fell. The real depreciated 0.1 percent to 2.0666 per U.S. dollar.

“With the external scenario worsening every day, interest rates in Brazil will surely keep falling,” Rogerio Freitas, a partner at Rio de Janeiro-based hedge fund Teorica Investimentos, said in a phone interview. “Today the markets seem to be reacting positively to the speculation about further stimulus measures in the U.S., but I don’t think this optimism will last long. Problems such as the crisis in Europe are still out there.”

Global stocks climbed as Chicago Fed President Charles Evans said in a Bloomberg Television interview that he would support a variety of measures to boost growth, underscoring his preference for more stimulus.

Industrial Employment

In the Brazilian interest-rate futures market, yields on most contracts fell after a report from the national statistics agency showed the number of people employed in the industrial sector dropped for a second straight month, falling 0.3 percent in April from March.

“Growth in Brazil is nothing to be enthusiastic about, and the industrial sector is the main lagger,” Pedro Galdi, chief strategist at Sao Paulo-based brokerage SLW Corretora, said by phone. “The stimulus announced by the government so far should eventually help to boost growth, but those things take time.”

Latin America’s largest economy will expand 2.53 percent this year, according to the median estimate in a central bank survey of about 100 analysts published yesterday. A week earlier, analysts expected an expansion of 2.72 percent. Record low interest rates, tax breaks for companies and consumers and measures to boost credit won’t prevent growth from slowing in 2012, the survey indicates. Last year, Brazil expanded 2.73 percent, its second-worst performance since 2003.

The yield on the interest-rate futures contracts due in January dropped two basis points, or 0.02 percentage point, to 7.73 percent.

B2W, PDG Realty

B2W, the online retailer, jumped 4.9 percent to 5.78 reais. PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder by revenue, gained 2.8 percent to 3.36 reais.

Fibria Celulose SA, the world’s largest pulp producer, rose 3.5 percent to 12.80 reais after saying it is repurchasing bonds and renegotiating loan terms. Embraer SA added 2.5 percent to 14.02 reais, snapping a two-day drop after Standard & Poor’s revised its outlook on the plane builder to positive from stable.

Gerdau climbed 3.4 percent to 17.26 reais.

The Bovespa (IBOV) entered a bear market on May 17 after tumbling 21 percent from this year’s high on March 13 through that day. The gauge trades at 9.5 times analysts’ earnings estimates for the next four quarters, which compares with the 9.9 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 5.83 billion reais ($2.82 billion) in stocks in Sao Paulo today, data compiled by Bloomberg shows. That compares with a daily average of 7.15 billion reais this year through June 11, according to data from the exchange.

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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