Bovespa Has Biggest Weekly Jump in 11 Months as Commodities Gain

The Bovespa index posted its biggest weekly advance in 11 months as the Federal Reserve’s bond-purchase program spurred a commodities rally, boosting the outlook for Brazilian exporters.

The Bovespa rose 0.2 percent to 62,105.47 in Sao Paulo today, extending its weekly advance to 6.5 percent. Brazilian stocks jumped the most in seven weeks yesterday after the Fed said it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month.

“The Fed’s decision pleased the markets,” Fausto Gouveia, who helps manage 380 million reais ($189 million) at Legan Administracao de Recursos, said by phone from Sao Paulo. “The Bovespa should keep rising toward 65,000 in the near term. In the longer run, it will all depend on how the global economy will respond to the central banks’ actions.”

Oil company Petroleo Brasileiro SA climbed 1.8 percent to 23.30 reais as crude jumped in New York. The Standard & Poor’s GSCI index of 24 raw materials climbed 1 percent. Commodities producers account for about 43 percent of the Bovespa index’s weighting. The real strengthened 0.4 percent to 2.0121 per U.S. dollar in Sao Paulo.

The Bovespa jumped as much as 2.4 percent earlier today, extending a rebound from a June 5 low to more than 20 percent, the threshold for a bull market.

Steelmakers rallied this week after the government unveiled measures to cut electricity rates by as much as 28 percent following an increase in import tariffs last week. Power companies slumped.

Winners, Losers

“Utilities surely suffered with the government’s plan to lower energy rates, but on the other hand heavy users of electricity gain with this initiative,” Gouveia said. “That helps explain the recent rally by steelmakers. Some win and some lose.”

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker, has jumped 24 percent this week to 11.91 reais while Cia. Siderurgica Nacional SA is up 30 percent at 13.70 reais, the biggest weekly advance since 1994. The MSCI Brazil/Materials index gained 2 percent today and jumped 13 percent this week.

Cia. Energetica de Sao Paulo, the state-controlled power company known as Cesp, gained 3.2 percent to 21.65 reais, today, paring this week’s slump to 32 percent, the worst performance on the MSCI Brazil/Utilities index. Cia. Paranaense de Energia-Copel fell 2 percent to 32.65, pushing its weekly drop to 8.9 percent.

Lupatech SA, the Brazilian oil services provider, rose 3.9 percent to 3.17 reais after saying in a regulatory filing it plans to raise as much as 439.3 million reais in a share sale.

Rate Outlook

Homebuilder Rossi Residencial SA fell 6.3 percent to 5.61 reais, leading declines by companies that sell on credit, as traders pared bets for more interest rate cuts in Brazil after data showed economic activity grew in July at the fastest pace in 11 months.

“The economic recovery is already happening, and with the external outlook improving, the central bank will probably opt to keep interest rates unchanged for a while,” Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA, said by phone from Sao Paulo.

Swap rates advanced after the central bank said the economic activity index, a proxy for gross domestic product, rose 2.34 percent in July from a year earlier after a 0.99 percent gain in the prior month. The median forecast of 23 economists surveyed by Bloomberg was for a 2.1 percent annual pace of growth.

The Bovespa trades at 13.7 times analysts’ earnings estimates for the next four quarters, which compares with the ratio of 11.4 times for MSCI Inc.’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 11.83 billion reais in stocks in Sao Paulo yesterday, which compares with a daily average of 7.18 billion reais this year through Sept. 12, according to data compiled by the exchange.

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