The Bovespa stock index rose the most in a week, rebounding from near a five-month low, as traders pared bets for higher Brazilian borrowing costs, boosting the outlook for credit expansion.
Itau Unibanco Holding SA, Latin America’s biggest bank by market value, jumped the most in five months, leading a rally for financial shares. Lojas Renner SA and Cyrela Brazil Realty SA Empreendimentos e Participacoes led advances for retailers and homebuilders.
The Bovespa rose 0.6 percent to 65,771.33 at the 3:15 p.m. New York time close. Forty-two stocks rose on the measure while 26 declined. The real jumped 0.9 percent to 1.6646 per dollar.
“The drop in rate bets is always a sign of reduced risk aversion and inflation expectations,” said Marcelo Ribeiro, who helps manage 50 million reais ($29.8 million) at Pentagono Asset Management in Rio de Janeiro. Banks are benefiting from the outlook for greater credit expansion, he said.
Yields on Brazilian interest-rate futures contracts tumbled amid growing speculation that President Dilma Rousseff’s administration is almost finished with a plan to cut spending. The yield on the contract due in January 2013 dropped the most since October, falling 17 basis points, or 0.17 percentage point, to 12.68 percent.
Rousseff will hold a Cabinet meeting today to discuss plans to slash between 40 billion reais and 50 billion reais from this year’s budget, Sao Paulo-based news service IG reported. The cuts are likely to be announced Feb. 10, IG reported, without saying how it obtained the information.
Itau, Latin America’s biggest bank by market value, gained 3 percent to 35.80 reais as the MSCI Brazil/Financials Index increased 3.2 percent.
Natura Cosmeticos SA, Brazil’s biggest cosmetics maker, advanced 2.6 percent to 41.85 reais. Estee Lauder Cos., the maker of Mac cosmetics and Clinique skin care, may acquire a company in Brazil, Sao Paulo-based newspaper Valor Economico reported, citing Lauder Chief Executive Officer Fabrizio Freda.
The Bovespa had fluctuated between gains and losses in earlier trading as commodity producers declined.
The People’s Bank of China increased one-year lending and deposit rates by a quarter point each to contain inflation, sparking declines in copper and oil prices. Copper later rebounded.
Vale SA, the iron-ore producer whose top export market is China, fell 0.8 percent to 49.91 reais. Petroleo Brasileiro SA, Brazil’s state-controlled oil company, dropped for a third day, losing 1 percent to 26.96 reais.
OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, erased its decline in the final hour and a half of trading and surged 5.3 percent. After the close of trading, Batista’s investor relations office said in an e-mailed statement that the entrepreneur will hold a conference call at 7 a.m. New York time tomorrow to discuss business plans.
QGEP Participacoes SA, the energy exploration and production unit of Brazilian holding company Queiroz Galvao SA, raised 1.32 billion reais after pricing shares at 19 reais each in an initial public offering, below the range of 23 reais to 29 reais in the company’s Jan. 21 prospectus.
Of four IPOs so far this year in Brazil, three have raised less than they had sought.
Brazil’s benchmark equity gauge increased 0.1 percent yesterday, holding near the lowest since August, as economists reduced forecasts for Brazilian inflation, offsetting declines in oil producers.
The Bovespa fell 5.7 percent this year through yesterday on concern rising inflation will spur additional measures to restrict credit growth. The index trades for 10.5 times analysts’ earnings estimates, the cheapest since March 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 13.1 for the Shanghai Composite Index, 7.4 for Russia’s Micex, and 17.1 for India’s Sensex.