Bovespa Advances as China Demand Speculation Boosts Petrobras

The Bovespa index rose for a fifth day after China, Brazil’s main trading partner, and the European Central Bank cut interest rates to shore up growth, boosting the outlook for the South American country’s exports.

Oil companies Petroleo Brasileiro SA and iron-ore producer Vale SA, the two heaviest-weighted stocks on the equity gauge, contributed the most to the advance. Steelmaker Gerdau SA rose to a two-month high.

The Bovespa gained 0.5 percent to 56,379.06 at the close in Sao Paulo. The real rose 0.2 percent to 2.0250 per U.S. dollar at 5:19 p.m. local time. The Standard & Poor’s GSCI index of 24 raw materials climbed 0.4 percent after rising as much as 0.9 percent. Commodities producers account for about 42 percent of the Bovespa’s weighting.

“China’s decision signals the country’s government is committed to stimulate the economy, which should help to maintain Brazilian raw-materials exports at a good level,” Marcos Pessoa, an economist at the brokerage Renascenca, said in a phone interview from Sao Paulo.

The one-year lending rate in China will fall by 31 basis points and the one-year deposit rate will drop by 25 basis points effective tomorrow. The European Central Bank lowered its main refinancing rate to a record low 0.75 percent from 1 percent, as predicted in a Bloomberg survey of economists.

Global Growth View

Reports showing fewer workers in the U.S. filed for unemployment insurance payments and American companies added more workers than forecast helped to improve the global growth scenario, Eduardo Velho, chief economist at Planner Prosper, said by phone from Sao Paulo.

Applications for U.S. jobless benefits fell 14,000 in the week ended June 30 to 374,000, Labor Department figures showed today. Private employers expanded payrolls by 176,000 last month, according to figures released by Roseland, New Jersey-based ADP Employer Services, exceeding the most optimistic estimate in a Bloomberg survey of economists.

Petrobras, as the state-controlled Petroleo Brasileiro is known, rose 3.4 percent to 19.60 reais. Vale advanced 1.2 percent to 40.50 reais, the highest since May 3. Gerdau SA gained 2.8 percent to 18.13 reais.

The Bovespa earlier dropped as much as 0.4 percent as stocks in the U.S. and Europe fell after European Central Bank President Mario Draghi told reporters that today’s cut in interest rates may have only a limited impact on the euro-area economy as it slides toward recession.

‘Confidence Eroded’

“As the market’s confidence eroded in the past months, it gets harder for any action regarding monetary policy to work,” Velho said.

Retailer Cia. Hering tumbled 2.8 percent to 38.04 reais. Brewer Cia. de Bebidas das Americas dropped 1.4 percent to 77.90 reais.

Brazil’s benchmark equity gauge has fallen 18 percent since this year’s high on March 13 as the debt crisis in Europe worsened and growth in Brazil faltered. The index trades at 10 times analysts’ earnings estimates for the next four quarters, compared with 10.3 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.48 billion reais ($3.2 billion) in stocks in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.35 billion reais this year through July 4, according to data from the exchange.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE