Bovespa Rebounds From Two-Day Drop on Inflation, Europe Optimism

The Bovespa (IBOV) index gained for the first day in three as Brazilian inflation trailed forecasts and European leaders boosted their rescue fund and tightened budget rules, easing concern the region’s crisis will curb growth.

MRV Engenharia & Participacoes SA, Brazil’s fifth-biggest homebuilder by revenue, led gains by stocks linked to Brazil’s domestic demand. Mining companies Vale SA and MMX Mineracao & Metalicos SA followed metals prices higher. Banco do Brasil SA, Latin America’s biggest bank by assets, advanced after Chairman Nelson Barbosa said the lender doesn’t need to raise capital.

The Bovespa advanced 1.1 percent to 58,078.85 at 1:26 p.m. in Sao Paulo. The gauge is up 0.3 percent this week. Fifty-six stocks gained on the gauge, while 11 fell today. The real strengthened 0.7 percent to 1.8111 per U.S. dollar.

“As far as current numbers show, inflation is not a matter for concern,” Renato Bandeira de Mello, head of equity trading at Futura Corretora, said by phone from Sao Paulo. “Investors are also pleased with the news coming from Europe.”

The first preview of the IGP-M report showed Brazil inflation was 0.04 percent this month through yesterday, according to the Rio de Janeiro-based Getulio Vargas Foundation. That compares to a median estimate for 0.42 percent among 17 economists surveyed by Bloomberg.

Consumer prices in Sao Paulo, Brazil’s biggest city, rose 0.49 percent in the four weeks ended Dec. 7, according to the Foundation Economics Research Institute. That compares to the median estimate of 0.58 percent among 19 economists polled by Bloomberg.

EU Summit

In Europe, leaders meeting in Brussels tightened deficit rules and agreed to boost their crisis-fighting war chest as much as 200 billion euros ($267 billion) by funneling money to the International Monetary Fund.

The Bloomberg Base Metals 3-Month Price Commodity Index rose 1.1 percent. Vale added 0.6 percent to 38.72 reais, and MMX climbed 2 percent to 6.57 reais.

Banco do Brasil gained 1.5 percent to 24.03 reais after Chairman Barbosa, who is also deputy finance minister, said the federally controlled bank doesn’t need to increase capital. O Globo newspaper reported on Dec. 5 state-controlled banks including Banco do Brasil may issue new shares as part of plans by the government to boost capital at its financial institutions so they can meet cash requirements and continue making loans.

Suzano Papel & Celulose SA, Latin America’s second-largest pulp maker, slid 0.7 percent to 7.09 reais after earlier tumbling as much as 2.5 percent. Chief Executive Officer Antonio Maciel Neto said today in Sao Paulo the company may sell shares or delay investments should its planned asset sales fail.

Bovespa Valuation

OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, gained 0.3 percent to 14.45 reais after Batista said the company will start crude production this month.

The Bovespa entered a bull market in October after gaining 22 percent from a two-year low on Aug. 8 as Brazil’s interest- rate cuts and speculation Europe was working toward solving its debt crisis buoyed demand for equities. The gauge is still down 16 percent this year on concern flagging global commodity demand and quickening inflation will hurt corporate earnings growth.

Brazil’s benchmark equity index trades at 10.4 times analysts’ earnings estimates, in line with the ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 6.27 billion reais ($3.47 billion) in stocks in Sao Paulo yesterday, data compiled by Bloomberg show. That compares with a daily average this year of 6.52 billion reais through Dec. 1, 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 in New York at papadopoulos@bloomberg.net

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