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Bovespa Index Advances for Second Day as Higher Interest Rate Bets Ease
Brazil’s Bovespa stock index gained for a second day, climbing to the highest level in three weeks, as traders eased bets for interest-rate increases and the measure’s heaviest-weighted stock rallied the most since May.
Vale SA, the world’s largest iron-ore producer, jumped 6.2 percent amid speculation China, the biggest consumer of the steelmaking ingredient, will ease measures to curb growth. Steelmakers Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional SA rallied for a second session. Empresa Brasileira de Aeronautica SA, the world’s fourth-largest planemaker, surged the most since 2009 after winning orders worth $1.9 billion.
The Bovespa increased 1.8 percent to 64,462.50, the highest level since June 25, at the close of trading in Sao Paulo at 4 p.m. New York time. Forty-four stocks gained on the measure while 19 fell. The real strengthened for the first time in five days, gaining 1 percent to 1.7740 per dollar.
“The monetary policy committee might not have to raise rates as much,” said Roberto Sevalli, who oversees 380 million reais ($214 million) as director of Parana Banco Asset Management in Curitiba, Brazil. “The market here has strengthened a bit more than the American one.”
The Bovespa rose the most in a week yesterday on speculation companies will report second-quarter profit growth and as rising commodities prices boosted producers.
Brazil’s consumer prices unexpectedly fell in the month through mid-July. Consumer prices as measured by the IPCA-15 index dropped 0.09 percent in the June 15-July 13 period, the first monthly deflation in four years, the national statistics agency said today.
Interest Rate Bets
Brazilian traders are wagering that policy makers will lift the benchmark interest rate a half percentage point this week even as economists maintain forecasts for a bigger increase.
The average estimate fell to a 50 basis-point change from 75 basis points, or 0.75 percentage point, according to yields on interest-rate future contracts maturing Aug. 2. The call clashes with forecasts by 36 of the 38 economists surveyed by Bloomberg for the central bank to raise the overnight rate to 11 percent from 10.25 percent.
Vale jumped 2.40 reais, the most since May 27, to 40.90 reais after Claudio Alves, director for iron-ore sales in the Americas, said the company is producing the steelmaking ingredient at full capacity as Chinese demand rebounds. China is starting to rebuild steel stockpiles, while the U.S. and Europe will likely increase inventories in the fourth quarter, Alves said today at an event in Rio de Janeiro.
Embraer Rallies
Usiminas, Brazil’s second-biggest steelmaker, increased 3.6 percent to 50.48 reais while CSN, the third-biggest, gained 5.3 percent to 27.63 reais.
Embraer, as the Brazilian planemaker is known, climbed 6.1 percent to 10.20 reais. The company won orders for 50 regional jets worth almost $1.9 billion at list prices, trumping larger competitor Bombardier Inc. Flybe, Britain’s biggest domestic airline, purchased 35 88-seat Embraer 175 aircraft worth $1.3 billion, while Steven Udvar-Hazy’s Air Lease Corp. said at the Farnborough Air Show that it would buy 15 larger 190 planes valued at $600 million.
MRV Engenharia & Participacoes SA, Brazil’s fifth-biggest homebuilder by revenue, fell the most in a month, losing 3.6 percent to 14.56 reais, after Credit Suisse Group AG downgraded the stock and said investors are underestimating the risk of a slowdown in government housing aid.
“We believe the market is paying very little attention to a potential momentary deceleration in MCMV program towards the end of the year, associated with the elections and a change in government staff,” Credit Suisse analysts including Marcello Milman wrote, referring to the government’s Minha Casa, Minha Vida program to finance low-cost housing.
The Bovespa index trades for 11.8 times analysts’ 2010 earnings estimates, compared with 11.6 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 15.3 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 13.4 times the reported profits of its companies after fetching 25.5 times in November, the most in almost six years, weekly data show.
To contact the reporter on this story: Alexander Cuadros in Rio de Janeiro at acuadros@bloomberg.net
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