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Bovespa Advances on Brazil Rate Outlook, China Stimulus Bets

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April 18 (Bloomberg) -- The Bovespa index gained for a second day as traders increased bets for lower interest rates in Latin America’s largest economy and as falling housing prices in China spurred speculation policy makers may act to shore up growth in Brazil’s top export market.

Online retailer B2W Cia. Global do Varejo jumped to a three-week high, leading gains by companies that sell in the local market. Steelmaker Usinas Siderurgicas de Minas Gerais SA advanced the most in a month. Vale SA, the iron-ore producer whose main export market is China, rose a second day.

Brazil’s benchmark equity measure rose 0.5 percent to 63,010.48 at the close in Sao Paulo. Forty-five stocks gained while 22 fell. The real weakened 1 percent to 1.8793 per U.S. dollar at 5:17 p.m. local time.

“Commodities producers benefit from this speculation about more stimulus in China,” Marcello Paixao, a money manager at Sao Paulo-based hedge fund Principia Asset Management, said in a telephone interview. Consumer stocks gained as investors awaited today’s rate decision, he said.

The central bank will lower the benchmark Selic rate to 9 percent from 9.75 percent, according to the median estimate of 69 economists surveyed by Bloomberg. In the Brazilian interest-rate futures market, yields on most contracts fell. The yield on the contract due in January 2015 dropped two basis points, or 0.02 percentage point, to 9.69 percent.

Economic Stimulus

Besides reducing borrowing costs, President Dilma Rousseff’s administration has cut taxes on consumer goods, increased funding to the state development bank and pledged to boost public investments to ensure economic growth of 4.5 percent this year. Brazil’s gross domestic product expanded 2.7 percent in 2011, its second-worst performance since 2003.

B2W advanced 3.3 percent to 8.33 reais.

Vale gained 0.5 percent to 42.24 reais after earlier rising as much as 2 percent. Voting shares of Usiminas, as Usinas Siderurgicas is known, jumped 4.7 percent to 18 reais. In China, investors speculated policy makers will ease monetary policy after home prices in the country fell in a record 37 of 70 cities tracked by the government in March.

The Bovespa earlier declined as much as 0.4 percent on concern a worsening debt crisis in Europe will curb demand for emerging-market equities including Brazilian stocks. European stocks dropped as Bank of England policy maker Adam Posen ended his support for more stimulus and bad loans surged in Spain.

Gol Declines

Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest airline by market value, slumped 7.6 percent to 10.51 reais as the Finance Ministry denied a report saying it may cut payroll taxes to boost competitiveness in the industry. The stock rallied 11 percent yesterday after Valor Economico said the government may cut some levies.

MRV Engenharia & Participacoes SA, Brazil’s third-biggest homebuilder by revenue, fell 5.1 percent to 12.95 reais, the worst performer on the BM&FBovespa Real Estate Index, which climbed 0.4 percent. The company said its contracted sales declined 2 percent to 815 million reais ($434 million) in the first quarter, according to a regulatory filing.

Brazil’s benchmark equity measure has gained 11 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 debt crisis. The gauge trades at 10.4 times analysts’ earnings estimates, in line with the 10.4 ratio for MSCI Inc.’s measure of 21 developing nations’ equities, weekly data compiled by Bloomberg show.

Traders moved 9 billion reais in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.11 billion reais this year through April 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 in New York at papadopoulos@bloomberg.net

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