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Bovespa Rises as Embraer Surges on Orders; Consumer Stocks Rally

The Bovespa index advanced as Embraer SA surged on an agreement to sell 47 planes and consumer stocks gained after President Dilma Rousseff said Brazil will reduce electricity costs more than previously announced.

Embraer, the world’s fourth-largest planemaker, rallied to an eight-month high after signing a $4 billion contract with Republic Airways Holdings Inc. Homebuilder Cyrela Brazil Realty SA led gains among companies that depend on domestic demand as the MSCI Brazil/Consumer Discretionary Index rose the most among 10 industry groups. State-controlled power utility Centrais Eletricas Brasileiras SA declined for a second day.

The Bovespa rose 0.3 percent to 62,132.21 at 1:20 p.m. in Sao Paulo. Thirty-four stocks advanced on the gauge while 30 declined. The real climbed 0.2 percent to 2.0311 per dollar.

Rousseff said yesterday that rate cuts taking effect today will pare consumers’ power costs by 18 percent and those for industry by 32 percent, compared with the reductions of 16.2 percent and 28 percent she announced in September.

“Dilma’s announcement has the goal of boosting growth in the country,” Andre Perfeito, the chief economist at Gradual Investimentos, said by phone from Sao Paulo.

Embraer rose 9.4 percent to 16 reais. A close at that level would be the highest since May 7.

Cyrela gained 2.3 percent to 18.41 reais. The MSCI Brazil/Consumer Discretionary Index climbed 1.3 percent, poised for the highest close since Jan. 10.

Brazil’s move to reduce energy prices is part of an interventionist policy Rousseff has used to try to spur a rebound and boost competitiveness in Latin America’s biggest economy. Other measures have included cutting taxes on consumer goods and increasing tariffs on imports.

Slower Growth

The economy expanded an estimated 1 percent last year, according to the central bank, the slowest in three years. Annual inflation accelerated for a fourth straight month to 6.02 percent, the fastest pace in a year, the national statistics agency reported yesterday.

Voting shares of Eletrobras, as Centrais Eletricas is also known, dropped 3.3 percent to 7.58 reais.

“Power utilities have been suffering a lot because of these measures, and today’s decline is a reaction to the latest announcement,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview.

Bull Market

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 economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its advance to 18 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 of stocks in Sao Paulo yesterday was 5.9 billion reais, compared with a daily average of 7.25 billion reais in 2012, according to data compiled by the exchange.

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