The Bovespa stock index rose for a third day, capping the biggest weekly gain in a month, as the Brazilian central bank’s measures to cool inflation spurred traders to pare bets for higher borrowing costs.
Cia. de Bebidas das Americas, Latin America’s largest brewer, and B2W Cia. Global do Varejo, Brazil’s largest online retailer, both jumped the most in a month, leading gains among companies that benefit most from domestic demand.
“If this has the effect of reducing the next cycle of monetary tightening, on balance it would help the stock market,” said Oliver Leyland, who helps oversee $1.1 billion at Mirae Asset Global Investments Brasil in Sao Paulo.
The Bovespa gained 0.3 percent to 69,766.09 at the 3 p.m. New York time close, for a weekly advance of 2.3 percent, the largest since Nov. 5. Forty stocks rose on the index while 27 fell. The real strengthened 0.5 percent to 1.6963 per dollar.
Brazil’s benchmark equity gauge rose yesterday as industrial output expanded at the fastest pace in three months, overshadowing concern that higher borrowing costs will restrict credit growth.
The nation’s central bank raised the reserve requirement on time deposits to 20 percent from 15 percent and an additional requirement for cash deposits will climb to 12 percent from 8 percent, according to a statement distributed in Brasilia today.
Higher Reserve Requirements
Banks will be required to use more capital to back consumer loans that exceed 24 months. The higher reserve requirement will remove 61 billion reais ($35.9 billion) from the economy.
In response to the central bank’s measures, traders pared bets for increases in borrowing costs. The yield on the interest-rate futures contract due April 2011 fell the most since January 2009, plunging 0.29 percentage point to 11.07 percent.
AmBev, as the brewer is known, rose 3.3 percent to 238.99 reais. B2W advanced 4.6 percent to 34.50 reais, the highest close since May.
Cia. Energetica de Minas Gerais led a rally for utilities on speculation President-elect Dilma Rousseff will maintain government policies on the industry. The state-controlled electricity utility serving Minas Gerais state rallied 3.1 percent to 29.60 reais. Rousseff’s biggest coalition partner wants former Energy Minister Edison Lobao to return to his post, a party member familiar with the plans said earlier this week.
Investors expect Rousseff to name Lobao to the ministry, signaling policy continuity that will ensure government investment, said Rosangela Ribeiro, an analyst at SLW Corretora.
Advances on the index were limited as lenders tumbled, with Banco Santander Brasil SA leading industry declines after central bank chief Henrique Meirelles said reserve requirements are being raised to a level slightly tighter than before the 2008 global credit crunch.
“In the short term, clearly banks are going to come under pressure, because lending growth is to some extent going to be affected,” Leyland said.
Santander, the Brazilian unit of Spain’s largest lender, tumbled 3.3 percent to 22.58 reais while Banco do Brasil SA, Latin America’s biggest bank by assets, dropped 2.7 percent to 32.60 reais.
The Bovespa dropped as much as 0.8 percent early in the day after a report said employers in the U.S., Brazil’s second- biggest trading partner, added fewer jobs than forecast in November and the unemployment rate unexpectedly increased, a signal the economy may be faltering.
Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg, after a revised 172,000 increase the prior month, Labor Department figures showed in Washington. The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated.
The Bovespa trades for 15.6 times analysts’ 2011 earnings estimates after gaining 1.4 percent this year before today. That compares to a ratio of 13.2 for the Shanghai Composite Index, which has slipped 13.3 percent. Russia’s Micex trades at 7.2 times next year’s profit after a 20 percent gain, while India’s Sensex trades at a ratio of 15.7 and is up 14 percent this year.