Bovespa Rises a Second Day as Homebuilders Rally on Rate Outlook

The Bovespa (IBOV) advanced, posting the only gain among major equity indexes in the Americas, as homebuilders and consumer stocks jumped on speculation policy makers will further reduce interest rates to shield Brazil’s economy from the global slowdown.

Brookfield Incorporacoes SA, Brazil’s fourth-largest homebuilder by revenue, advanced the most on the benchmark. PDG Realty SA Empreendimentos e Participacoes rose to the highest in almost three weeks. Online retailer B2W Cia. Global do Varejo gained for a fifth day, the longest winning streak in nine months.

The Bovespa rose 1.1 percent to 55,650.51 at the close in Sao Paulo. Fifty-four stocks gained on the gauge while 12 fell. The real weakened 0.2 percent to 2.0724 per U.S. dollar at 5:45 p.m. local time.

“The Brazilian government has been very clear in saying that, amid the slowdown in the global economy, its number one priority is to boost growth,” Henrique Kleine, the chief analyst at Magliano SA brokerage, said by phone from Sao Paulo. “That’s why you see stocks linked to domestic consumption performing better than the market’s average.”

Brookfield gained 6.4 percent to 3.65 reais. PDG Realty rose 4.2 percent to 3.50 reais. The BM&F Bovespa Real Estate Index (IMOBBV) advanced 1.8 percent.

B2W added 3.8 percent to 6 reais. Hypermarcas SA, the maker of more than 180 consumer products, climbed 4 percent to 12.01 reais. In the Brazilian interest-rate futures market, yields on most contracts fell. The yield on the contract due in January slid two basis point, or 0.02 percentage point, to 7.71 percent.

European Debt

The Bovespa earlier fell as much as 1 percent after a drop in U.S. retail sales and rising borrowing costs at debt auctions in Europe rekindled concern about the global recovery.

“The Bovespa index dropped about 20 percent since this year’s high, so one could argue that there’s not much room for further declines,” Alexandre Ghirghi, a portfolio manager at Metodo Investimentos, said by phone from Sao Paulo. “On the other hand, the external outlook is still worrisome, which keeps the index from posting a more solid recovery. It can rise one day or the other, but I don’t see a long-term trend.”

Italy sold 6.5 billion euros ($8.15 billion) of one-year bills at 3.972 percent, which compares with a 2.34 percent rate at the previous auction May 11. Germany sold 4.04 billion euros of 10-year bunds at an average yield of 1.52 percent, up from a rate of 1.47 percent the last time the nation sold the securities on May 16. In the U.S., retail sales fell 0.2 percent in May, the second straight monthly drop, Commerce Department figures showed today.

Bear Market

The Bovespa entered a bear market on May 17 after tumbling 21 percent from this year’s high on March 13 through that day. The gauge trades at 9.6 times analysts’ earnings estimates for the next four quarters, which compares with the 9.9 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 7.98 billion reais ($3.86 billion) in stocks in Sao Paulo, data compiled by Bloomberg show. That compares with a daily average of 7.15 billion reais this year through June 12, 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 at papadopoulos@bloomberg.net

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