The Bovespa index entered a bull market as record-low interest rates boosted Brazilian consumer stocks and commodities exporters advanced on eased concern that the global slowdown will deepen.
The gauge rose 1.2 percent today to 63,312.46 at the close in Sao Paulo, extending its advance to 21 percent from a June 5 bear market low. Online retailer B2W Cia. Global do Varejo led gains over the past seven months, more than tripling. Homebuilder Gafisa SA more than doubled. Fibria Celulose SA, the world’s biggest pulp producer, added 92 percent.
Brazilian policy makers have cut borrowing costs by 5.25 percentage points since August 2011 to a record 7.25 percent in a bid to stoke consumer demand and boost growth. Commodities producers, which account for about 43 percent of the Bovespa’s weighting, benefited while raw-material prices measured by the Standard & Poor’s GSCI index jumped 16 percent since a June 21 low as stimulus measures from central banks around the world eased concern the global slowdown will deepen.
“Domestic consumption was the strongest portion of the Brazilian economy in 2012 because of government stimulus,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro. “Investors are more optimistic about global growth because of signs that activity in China remains strong and the budget deal in the U.S., so material producers benefit.”
President Dilma Rousseff last year ordered power and phone companies to lower rates, capped car imports from Mexico and lowered taxes on consumer goods to boost domestic spending. A report yesterday showed China’s services industries expanded at the fastest pace in four months, the latest sign that growth may be picking up in Brazil’s top trading partner. U.S. lawmakers on Jan. 1 passed a bill averting spending cuts and tax increases scheduled to take effect this year.
State-controlled oil company Petroleo Brasileiro SA (PBR:US), known as Petrobras, contributed the most to Bovespa’s advance today, rising 3.6 percent to 20.40 reais after confirming a “high potential of oil flow” in a Carcara well and declaring that two areas in Brazil’s Campos Basin have traces of good-quality oil.
OGX Petroleo e Gas Participacoes SA, the oil company controlled by Brazilian billionaire Eike Batista, rose 2.9 percent to 4.90 reais after earlier falling as much as 3.4 percent as crude slipped on concern the U.S. budget deal won’t reduce that country’s deficit fast enough.
The ratio of U.S. government debt to gross domestic product will probably peak at about 80 percent in 2014 and may stay at about that level for the rest of the decade, Moody’s Investors Service said yesterday. The ratings company assigns the U.S. its top Aaa ranking with a negative outlook.
Vale SA (VALE:US), the world’s biggest iron ore mining company, retreated 1.2 percent to 42.09 reais today as the Standard & Poor’s GSCI index of 24 raw materials decreased 0.3 percent.
The Bovespa’s 21 percent gain since June 5 compares with a 27 percent advance among stocks on India’s Sensex Index since its 2012 low on Jan. 2. Russia’s Micex index is up 18 percent from a May 23 low, and China’s Shanghai Composite has risen 16 percent from its low on Dec. 3.
The Bovespa climbed 7.4 percent in 2012, trailing an 11 percent gain by the MSCI BRIC Index of shares in Brazil, Russia, India and China. The MSCI All-Country World Index (MXWD) rose 13 percent last year.
Trading volume was 7.26 billion reais in stocks in Sao Paulo today, according to data compiled by Bloomberg.
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