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Bovespa Rises to Two-Week High on Central Bank’s Rate Signal

Jan. 17 (Bloomberg) -- The Bovespa index rose to a two-week high after Brazilian policy makers signaled that they will keep benchmark borrowing costs at a record low even as inflation exceeds targets.

Online retailer B2W Cia. Global do Varejo advanced the most in a month as companies that sell in the domestic market rallied. Rossi Residencial SA led gains among homebuilders. Steelmaker Cia. Siderurgica Nacional SA slumped to its lowest this month after Dow Jones reported it offered to pay $3.8 billion for ThyssenKrupp AG’s plants in the Americas.

The Bovespa rose 0.7 percent to 62,194.06 at close in Sao Paulo, the highest since Jan. 4. The real strengthened 0.2 percent to 2.0388 per dollar after the central bank board held the benchmark Selic rate at 7.25 percent yesterday, matching the forecast of analysts surveyed by Bloomberg. The best strategy is to keep monetary conditions unchanged for a “prolonged period,” policy makers said in a statement accompanying the unanimous decision.

“Lower rates should especially favor companies that depend on credit to sell,” Felipe Rocha, an analyst at brokerage Omar Camargo, said by phone from Curitiba, Brazil. “Investors understand that the central bank is concerned about inflation and wonder what else it could do to try to boost growth.”

Inflation ended the year at 5.84 percent, higher than the bank’s 4.5 percent target for a 28th straight month. Brazil’s gross domestic product expanded 1 percent in 2012, according to the median estimate of 30 economists surveyed by Bloomberg. That is about half the pace of the U.S. and Japan, according to separate surveys.

B2W Rally

B2W jumped 6.2 percent to 16.85 reais. Rossi rose 3.8 percent to 4.62 reais.

CSN slumped 3.7 percent to 11.98 reais. The Sao Paulo-based steelmaker presented a $3.8 billion offer for ThyssenKrupp’s plant in Alabama and Rio de Janeiro and is the main candidate to purchase the assets together with ArcelorMittal, Dow Jones reported, without saying where it got the information. A CSN press official in Sao Paulo declined to comment on the report. ThyssenKrupp didn’t immediately return a call seeking comment.

The Bovespa entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its gain to 19 percent.

Brazil’s benchmark equity gauge trades at 11.5 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume was 6.8 billion reais in stocks in Sao Paulo, which compares with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.

To contact the reporters on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net; Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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