Bovespa Advances as Consumer Stocks Gain on Brazil Rate Outlook

The Bovespa index (MXBR0CD) rose as consumer stocks gained after the central bank signaled further interest- rate cuts and Vale SA (VALE3) jumped after saying it will meet its sales target for this year.

Vale, the world’s second-largest mining company, contributed most to the gauge’s advance. Banco BTG Pactual SA rose in the first day of trading after raising as much as 3.66 billion reais ($1.94 billion) in an initial public offering. Cyrela Brazil Realty SA Empreendimentos e Participacoes, the country’s second-biggest homebuilder by revenue, was the best performer on the MSCI Brazil/Consumer Discretionary Index.

The Bovespa rose 0.7 percent to 62,198.06 at the close in Sao Paulo. Forty-one stocks declined while 26 advanced. The real weakened 0.3 percent to 1.8847 per U.S. dollar at 5:38 p.m. local time.

“The minutes from the policy meeting last week confirmed that the central bank will keep cutting rates further, which helps explain why consumer stocks and retailers are performing a bit better today,” Gustavo Mendonca, an economist at Oren Investimentos, said by phone from Rio de Janeiro. “Vale fell in the first hours of trading after its earnings were released, but it looks like officials were able to regain investors’ confidence during their conference call.”

Brazil’s economy is recovering more slowly than expected, and any additional interest-rate cuts should be carried out with “parsimony,” the central bank said in the minutes to its April 17-18 meeting released today. Vale declined as much as 3 percent after reporting a third consecutive drop in quarterly profit and then rebounded after Chief Executive Officer Murilo Ferreira said on a conference call that the company will meet its sales targets for this year.

Vale, PDG Realty

Vale gained 1.7 percent to 41.78 reais. Cyrela advanced 2.3 percent to 17.10 reais. Retailer Lojas Americanas SA jumped 2.3 percent to 17.39 reais. BTG Pactual gained 0.6 percent to 31.45 reais.

Natura Cosmeticos SA, Brazil’s biggest cosmetics maker, fell 4.3 percent to 43.31 reais, the steepest drop in seven months, after first-quarter profit trailed estimates. The company said net income was 151.5 million reais, below the 159.3 million reais average estimate for profit excluding some items of eight analysts surveyed by Bloomberg.

Brazil’s benchmark equity measure has gained 9.6 percent this year, buoyed by local interest-rate cuts, signs of expansion in the U.S. and speculation Europe may be closer to resolving its sovereign-debt crisis. The gauge has fallen 9 percent since this year’s high on March 13 as signs of a slowdown in China spurred speculation that demand for commodities exports may falter.

The Bovespa trades at 10.3 times analysts’ earnings estimates for 2012, in line with the 10.6 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 8.12 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.23 billion reais this year through April 25, according to data from the exchange.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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