Bovespa Index Gains on Reduced Brazilian Inflation Forecasts

The Bovespa stock index advanced, rebounding from a two-day drop, after economists reduced their inflation forecasts for 2012 and a report showed consumer prices declined more than forecast in June.

Homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes advanced the most in a month, leading gains by companies that depend on domestic demand. EDP - Energias do Brasil SA (ENBR3) climbed after saying it plans to raise 748.8 million reais ($469 million) by selling 19.9 million shares for 37.59 reais each in a secondary offering in Brazil, according to a statement posted on the website of Brazil’s securities regulator.

The Bovespa rose 0.3 percent to 61,216.98 at the close of Sao Paulo trading at 4:15 p.m. New York time after earlier falling as much as 0.4 percent. Forty stocks climbed on the index, while 26 fell. The real strengthened 0.6 percent to 1.5949 per U.S. dollar.

“The latest inflation data suggest that price indexes are converging to the government’s target,” William Castro Alves, an analyst at brokerage XP Investimentos, said in a phone interview.

Brazil’s IPC-S consumer price index declined 0.15 percent in the month ending June 22, the Rio de Janeiro-based Getulio Vargas Foundation said today. That compares to a median forecast of a 0.13 percent drop in a Bloomberg survey of 11 economists.

Consumer Prices

Consumer prices will rise 5.15 percent in 2012, from a week-earlier forecast of 5.18 percent, according to a June 24 central bank survey of about 100 economists published today. Policy makers target inflation of 4.5 percent, plus or minus two percentage points.

Cyrela gained 3.7 percent to 15.40 reais, the most since May 20. Energias do Brasil climbed 1.7 percent to 38.75 reais.

Vale SA (VALE3), the world’s largest iron-ore producer, slid 0.1 percent to 44.04 reais after earlier dropping 0.8 percent. The Rio de Janeiro-based company cut its annual production target by 10 percent to 469 million metric tons in 2015. Vale previously targeted 2015 output of 522 million tons, according to an e-mail statement sent today by the company’s press office.

Brazil Pharma SA slumped 4.9 percent to 16.40 reais. The pharmacy chain controlled by Banco BTG Pactual SA started trading in Sao Paulo today after selling shares at 17.25 reais each in an initial public offering last week.

Petrobras Gains

Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil company, rose 0.9 percent to 23.08 reais. Petrobras, as the company is known, is seeking to borrow about $47 billion by 2014 as it develops the Americas’ largest crude discovery in three decades, Chief Financial Officer Almir Barbassa said today in Sao Paulo.

Petrobras is currently revising its five-year, $224 billion investment plan, which is updated annually, as it develops oil fields in Brazil’s offshore pre-salt region. The company’s Lula field was the biggest crude find in the Americas since Mexico’s Cantarell in 1976.

Separately, the company discovered natural gas in an onshore field near an area where Brazil plans to auction exploration licenses later this year. The gas discovery at the Ilha Pequena block in the Sergipe Basin hasn’t been declared commercial yet, the National Petroleum Agency said on its website.

The Bovespa has lost 16 percent from a November high on concern quickening inflation may hurt domestic demand, while a slowdown in global economic growth could cut the appetite for commodities.

Earnings Estimates

The Bovespa trades at 9.8 times analysts’ earnings estimates, the lowest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 12.8 for the Shanghai Composite Index, 6.2 for Russia’s Micex and 14.9 for India’s Sensex.

Traders moved 4.7 billion reais in stocks today, data compiled by Bloomberg show. That compares to a daily average this year of 6.5 billion reais, according to data from the exchange.

Investors pulled 1.48 billion reais from Latin America’s largest equity market in the year through June 8, according to 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 in New York at papadopoulous@bloomberg.net

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