Bloomberg News

Bovespa Index Gains for Third Day as Global Optimism Lifts Vale

October 16, 2012

Brazil’s Bovespa (IBOV) index rose for a third day after U.S. and German reports spurred global economic optimism and as speculation Spain is closer to getting a bailout eased European debt concern.

Iron-ore producer Vale SA (VALE3) contributed the most to the gauge’s advance. Power utility Cia. Energetica de Minas Gerais rose after excluding three hydropower plants from a list of possible concession renewals, shielding it from lower prices imposed by the government.

Brazil’s main stock gauge climbed 0.2 percent to 59,743.87 at the close of trading in Sao Paulo. The real strengthened 0.1 percent to 2.0344 per U.S. dollar. Global stocks gained as reports showed German investor sentiment improved for a second month and U.S. industrial production increased more than economists forecast.

“Investors are more optimistic today, with reports that Spain may have access to bailout funds,” Pedro Galdi, the chief strategist at SLW Corretora, said by phone from Sao Paulo. “Data in Germany and in the U.S. were also good. Stocks are reacting to a more favorable external outlook.”

Germany is open to Spain seeking a precautionary credit line from Europe’s rescue fund, two senior coalition lawmakers said. The comments by Michael Meister, a deputy caucus leader of Chancellor Angela Merkel’s Christian Democratic bloc, and Norbert Barthle, her party’s budget spokesman, indicate a rolling back of German resistance to a full sovereign bailout for Spain.

Vale Gains

Vale climbed 2 percent to 36.95 reais. Iron ore was poised to rally to its highest level since July on speculation infrastructure investments in China, the biggest buyer, will buoy demand, Neville Power, the chief executive officer at Australia-based Fortescue Metals Group Ltd., said today in an interview on Bloomberg Television.

Cemig rose 1.5 percent to 25.90 reais after rallying as much as 6.2 percent. The company’s decision not to apply for an extension of licenses to operate Sao Simao, Jaguara and Miranda hydropower plants is “further proof of the company’s commitment to best management practices as well as its minority shareholders,” Banco Itau BBA SA’s Marcos Severine and Mariana Coelho wrote in a note to clients.

President Dilma Rousseff and Energy Minister Edison Lobao announced last month measures to force power utilities seeking license renewals to cut rates by as much as 28 percent to stoke economic growth and boost the competitiveness of manufacturers.

Localiza Earnings

Localiza Rent a Car SA, Latin America’s biggest car-rental company, dropped 1.7 percent to 35.10 reais after earlier gaining 0.8 percent. While third-quarter net income of 71.4 million reais ($35.1 million) trailed analysts’ estimates, net sales increased 6.5 percent from a year earlier.

Oil company Petroleo Brasileiro SA was unchanged at 22.80 reais after earlier falling 1.1 percent. Chief Executive Officer Maria das Gracas Foster told reporters today in Rio de Janeiro that Petrobras doesn’t plan to raise gasoline prices in the short-term and that any price increase will be mid- to long- term.

“Remarks about the outlook for fuel prices always have an impact on shares,” Luiz Otavio Broad, an analyst at Agora CTVM SA brokerage, said by phone from Rio de Janeiro. “A more firm statement from an official, ruling out further increases, makes investors a bit cautious about the stock.”

The Bovespa has climbed 14 percent from this year’s low on June 5 as stimulus from central banks around the world eased economic concern and borrowing costs at a record low in Brazil boosted stock demand. The index trades at 14.2 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.5 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 7.58 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.27 billion reais this year through Oct. 11, according to data compiled by 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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