The Bovespa index advanced from a nine-month low after Brazilian policy makers raised borrowing costs less than some analysts had forecast, spurring speculation that monetary tightening will be limited.
Retailer Cia. Brasileira de Distribuicao Grupo Pao de Acucar gained the most in 11 weeks as consumer stocks rallied. Gol Linhas Aereas Inteligentes SA rose the most this year as investors speculated a reduction in fuel taxes will help the airline reduce costs. Petroleo Brasileiro SA contributed the most to the benchmark’s advance as crude rebounded. Lender Itau Unibanco Holding SA fell the most since September.
The Bovespa added 0.5 percent to 53,165.91 at the close of trading in Sao Paulo. Forty-two of the 69 stocks on the measure advanced. The real weakened 0.9 percent to 2.0190 per dollar and swap rates plunged after policy makers raised the target lending rate 25 basis points to 7.50 percent from a record low. Eighteen of 58 economists surveyed by Bloomberg forecast an increase of 50 basis points.
“The market was waiting for a 25 basis point increase, but there was some concern the central bank could be more aggressive,” Lucas Brendler, who helps manage 5 billion reais at Geracao Futuro, said by phone from Porto Alegre, Brazil. “The fact that two board members voted to keep the rate unchanged fuels expectations that the current cycle of increase might be smoother.”
Pao de Acucar rallied 3.3 percent to 107.76 reais, the biggest gain since Jan. 31. Homebuilder Gafisa SA gained 4.2 percent to 3.95 reais.
Gol surged 11 percent to 12.79 reais. Agencia Estado reported that Distrito Federal, the district where Brazil’s government is seated, is lowering a tax on airline fuel to 12 percent from 25 percent. The news service cited the head of the country’s association of airlines, Eduardo Sanovicz.
Petrobras, as Petroleo Brasileiro is also known, rose 3.8 percent to 17.82 reais as West Texas Intermediate futures climbed from a four-month low.
The Bovespa fell as much as 0.9 percent in intraday trading on speculation Brazil’s economic recovery may falter as the target lending rate is increased.
“Investors are uncomfortable now with the situation in the country, with prices rising and growth still slow,” Carlos Muller, the chief analyst at the asset management firm Geral Investimentos, said in a phone interview. “Another reason to worry is pressure over the central bank because the government is always saying what should and should not be done regarding inflation.”
Consumer prices rose at an annual rate of 6.59 percent in March, exceeding the upper limit of the central bank’s preferred range for the first time since November 2011. The target is 4.5 percent, plus or minus 2 percentage points. Brazil’s gross domestic product rose 0.9 percent in 2012.
Itau plunged 3.4 percent to 32.69 reais, the biggest drop since Sept. 25. The MSCI Brazil/Financials index fell 2.9 percent to the lowest this year. Health insurer Sul America SA declined 5.1 percent to 15 reais after Bank of America Corp. cut its recommendation to the equivalent of hold.
The Bovespa has retreated 16 percent from this year’s high on Jan. 3 amid concern accelerating inflation may curb Brazil’s economic recovery and the government’s interventionist policies will hurt profits in industries including utilities and energy. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 10 percent over the same period.
Brazil’s benchmark equity gauge trades at 10.8 times analysts’ earnings estimates for the next four quarters, compared with 10.3 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.
Trading volume for stocks was 6.95 billion reais in Sao Paulo today, according to data compiled by Bloomberg. That compares with a daily average of 7.7 billion reais this year, according to data compiled by the exchange.