Bovespa Index Advances Most in Two Months as Commodities Rally

The Bovespa index rose the most in two months as prospects for a solution to Europe’s debt crisis lifted commodity prices and improved the outlook for Brazil’s largest companies.

Vale SA, the world’s largest iron-ore producer, advanced after metals reversed losses. Oil companies OGX Petroleo & Gas Participacoes SA and Petroleo Brasileiro SA followed crude higher. Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, paced advances for companies that depend on domestic demand even after economists raised their 2012 Brazil inflation forecasts.

The Bovespa gained 4 percent to 53,273.11 at the close of trading in Sao Paulo, the most since Aug. 9. Sixty-five stocks rose on the index while two dropped. The real strengthened 0.2 percent to 1.7675 per dollar.

“Everything’s gaining on Sarkozy and Merkel’s comments on the plan to shore up banks,” said Alexandre Ghirghi, who manages about 150 million reais ($84.9 million) at Metodo Investimentos in Sao Paulo.

Global stocks and commodities rose after the leaders of France and Germany pledged a plan to stem the debt crisis in three weeks. German Chancellor Angela Merkel and French President Nicolas Sarkozy said yesterday they will deliver a plan to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit. Belgium said today it will buy part of Dexia SA and provide security for depositors as part of a plan to rescue the lender.

Commodities Rise

The Standard & Poor’s GSCI index of 24 raw materials advanced 2.1 percent. The Bloomberg Base Metals 3-Month Price Commodity Index rose 1.5 percent after earlier falling as much as 0.3 percent.

Vale rose 3.2 percent to 39.55 reais. OGX climbed 4.7 percent to 11.92 reais as state-controlled Petrobras rose 3.3 percent to 18.91 reais.

Economists covering Brazil raised their 2012 inflation forecast for a sixth straight week after commodity prices rose and the central bank signaled it will cut borrowing costs to protect the country from turbulence in world markets. Consumer prices will rise 5.59 percent next year, according to the median forecast in an Oct. 7 central bank survey of about 100 economists published today, more than a forecast of 5.53 percent the previous week.

Renner jumped 7.1 percent to 52.50 reais.

Foreign investors have pulled 360.1 million reais from Latin America’s largest equity market in the year through September, data from the Sao Paulo exchange show.

The index on Oct. 7 posted a third straight weekly drop, the longest losing streak since June, on concern Europe’s debt crisis will slow global growth while fewer interest-rate cuts in Brazil may limit domestic demand.

Bear Market

The Bovespa entered a bear market in July after plunging 20 percent from its 2010 bull-market peak. The measure has since extended that drop to 27 percent and trades at 8.9 times analysts’ earnings estimates, weekly data compiled by Bloomberg show. That compares to a ratio of 9.5 for MSCI Inc.’s gauge of 21 developing nations’ equities.

Traders moved 5.02 billion reais in stocks in Sao Paulo, compared with a daily average this year of 6.3 billion reais, data compiled by Bloomberg show.

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