The Ibovespa rallied the most among the world’s major equity benchmarks after data showed China’s imports increased more than forecast, fanning speculation that the economy is improving in Brazil’s top trading partner.
Vale SA, the world’s largest iron-ore producer, contributed the most to the gain as China reported record imports of the steel-making ingredient and after a measure of the company’s second-quarter profitability exceeded analysts’ estimates. Brookfield Incorporacoes SA gained the most in 11 months as homebuilders rallied.
The Ibovespa surged 3.1 percent to 48,928.82 at the close of trading in Sao Paulo, the most among 94 major equity benchmarks tracked by Bloomberg. The gauge has dropped 20 percent this year. The real gained 1 percent to 2.2916 per dollar at 5:20 p.m. local time. The Bloomberg Base Metals 3-Month Price Commodity Index rose 2.5 percent. China’s imports jumped 10.9 percent in July, more than the 1 percent gain forecast by economists surveyed by Bloomberg.
“After falling so much this year, many stocks are trading at attractive prices,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores SA, said by phone from Sao Paulo. “On a day like today, when global markets are doing well, those stocks rebound. When you look at Vale’s earnings, you realize that it’s very cheap given the outlook for its business.”
Commodities producers account for about 39 percent of the Ibovespa’s weighting. The MSCI World Index advanced 0.5 percent.
Vale, the heaviest-weighted stock on the index, added 3 percent to 29.93 reais. The company had adjusted earnings per share of 1.04 reais, beating the 1.02 reais average estimate among analysts surveyed by Bloomberg.
The company said in a statement accompanying its quarterly earnings that “the slowdown in China should be moderate.” Iron-ore imports in the country, Vale’s biggest overseas market, rose 17 percent to a record 73.14 million metric tons in July, according to data from the General Administration of Customs.
MMX Mineracao & Metalicos SA, the iron-ore producer controlled by Eike Batista, advanced 8 percent to 1.75 reais.
Brookfield rallied 9.2 percent to 1.67 reais. The Getulio Vargas Foundation reported today that its IGP-M index of wholesale, construction and consumer prices increased 0.13 percent from July 21 through July 31, slower than the 0.20 percent median forecast of economists surveyed by Bloomberg.
The outlook for equities is still negative given concern that the Federal Reserve will soon reduce its bond-buying program aimed at boosting the U.S. economy, said Fausto Gouveia, who helps manage 380 million reais at Sao Paulo-based Legan Administracao de Recursos.
Brazil’s main equity index wiped out $259 billion from the value of stocks this year as of yesterday, according to data compiled by Bloomberg. The equity gauge trades at 12.3 times analysts’ earnings estimates for the next four quarters, compared with 10.4 for the MSCI Emerging Markets Index of 21 developing nations’ equities.
“You can have a better day or two depending on the news flow, but the trend looking ahead is still negative,” Gouveia said in a phone interview. “If the Fed starts cutting back stimulus, that would stop global equities from rising, and I don’t see anything positive in Brazil that could make the Ibovespa post a sustained recovery.”
Cleveland Fed President Sandra Pianalto said yesterday that a tapering of the central bank’s stimulus may be warranted if the labor market continues to strengthen. Chicago Fed President Charles Evans told reporters this week that he wouldn’t rule out a decision to cut monetary stimulus next month.
Trading volume of stocks in Sao Paulo was 7.74 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.58 billion reais this year through Aug. 6, according to data compiled by the exchange.