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Bovespa Gains as Homebuilders Advance on Interest-Rate Outlook

The Bovespa index rebounded from the biggest decline in a week as speculation that policy makers may further reduce borrowing costs in Brazil boosted companies that sell on credit.

Homebuilder Rossi Residencial SA was the best performer on the gauge as Brazilian swap rates declined after a report showed industrial output increased less than forecast in June. Oi SA plunged after the phone company’s second-quarter earnings trailed analysts’ estimates.

Brazil’s benchmark equity gauge advanced 0.3 percent to 56,291.93 at the close in Sao Paulo. Thirty-eight stocks rose on the index while 29 fell. The real appreciated 0.6 percent to 2.0438 per U.S. dollar at 5:32 p.m. local time.

“The second quarter was a weak one when it comes to economic growth,” Luis Gustavo Pereira, an analyst at Futura Corretora, said by phone from Sao Paulo. “Figures seem to support the central bank’s strategy to lower interest rates to shore up growth.”

Brazilian swap rates dropped after the national statistics agency said industrial production rose 0.2 percent in June. Economists had expected output to increase 0.8 percent from the previous month, according to the median of 41 estimates compiled by Bloomberg. Output fell 5.5 percent from a year ago.

Rossi added 8.6 percent to 5.05 reais. Competitor Cyrela Brazil Realty SA gained 4.9 percent to 15.53 reais. The BM&FBovespa Real Estate Index advanced 0.9 percent.

Fed ‘Disappointed’

The Bovespa earlier gained as much as 1.1 percent and pared its advance after the Federal Reserve refrained from committing to further stimulus to boost growth in the U.S.

The Federal Open Market Committee said in a statement today that it will “closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

The statement “disappointed those who were expecting a stronger commitment to further stimulus measures,” Joao Pedro Brugger, a portfolio manager at Leme Investimentos in Florianopolis, Brazil, said in a phone interview. “In the end, all the Fed said is that it’s aware that the U.S. economy is slowing. It pledged to do something in the future if needed, but, for now, nothing.”

Steelmakers dropped after an unexpected slowdown in Chinese manufacturing pushed metals lower, dimming the outlook for Brazilian producers.

Gerdau, CSN

Gerdau SA, Latin America’s largest steelmaker, fell 3.2 percent to 18.03 reais. Smaller competitor Cia. Siderurgica Nacional SA dropped 3.3 percent to 10.18 reais. The Bloomberg Base Metals 3-Month Price Commodity Index slid 1.4 percent.

“China’s numbers were slightly weak, which is especially bad for steelmakers and mining companies as it affects metals prices,” Pedro Galdi, the chief strategist at Sao Paulo-based brokerage SLW Corretora, said in a phone interview.

China’s purchasing manager’s index dropped to 50.1 in July, the country’s National Bureau of Statistics said in a statement, compared with a median forecast for a gain to 50.5 among 24 economists surveyed by Bloomberg News.

The Bovespa has dropped 18 percent from this year’s high on March 13 as the debt crisis in Europe worsened and growth in Brazil faltered. The index trades at 10.6 times analysts’ earnings estimates for the next four quarters, which compares with 10.5 for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.05 billion reais ($2.96 billion) in stocks in Sao Paulo today, data compiled by Bloomberg show. That compares with a daily average of 7.2 billion reais this year through July 31, according to data compiled by the exchange.

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