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Ibovespa Advances as Homebuilder Gain Offsets Commodity Slump

Dec. 12 (Bloomberg) -- The Ibovespa rose from a three-month low as consumer stocks gained on speculation the central bank will limit interest-rate increases, offsetting a slump by commodity producers on bets the U.S. will pare stimulus.

Homebuilder MRV Engenharia e Participacoes SA rallied the most in three weeks. Train operator ALL America Latina Logistica SA sank after Brazil’s transportation minister said supervision will be increased for a railroad where a fatal accident occurred in November, according to newspaper Valor Economico. Fleury SA fell as Morgan Stanley cut the medical-diagnostics provider to the equivalent of hold.

The Ibovespa rose 0.1 percent to 50,121.61 at the close of trading in Sao Paulo with 35 stocks higher and 35 lower. The gauge earlier fell as much as 0.5 percent. A report today showed Brazilian retail sales increased 0.2 percent in October, trailing the median forecast of 0.5 percent among economists surveyed by Bloomberg. Brazilian swap rates on the contract due in January 2016 fell 0.04 percentage point to 11.49 percent.

“The central bank seems to be comfortable with the current levels of inflation, and there are signs that the economy is still weak,” Gustavo Mendonca, an economist at Saga Capital, said by phone from Rio de Janeiro. “It seems like the tightening cycle is in fact close to an end.”

Usiminas, as Usinas Siderurgicas is also known, sank 2.1 percent to 12.98 reais. Competitor Gerdau SA fell 0.8 percent to 18.03 reais. Fleury lost 2 percent to 18.91 reais.

Railroad Supervision

ALL dropped 1.1 percent to 7 reais. Brazil will step up supervision of an ALL-operated railroad after an accident last month, Transportation Minister Cesar Borges said yesterday, according Valor Economico. ALL said in an e-mailed statement to Bloomberg News today that the railroad’s maintenance complies with safety rules and the company is continuing to investigate the cause of the Nov. 24 crash that killed eight people.

The Fed may consider reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll. The Standard & Poor’s GSCI index of 24 raw materials sank 0.6 percent.

“Unless there’s a positive surprise, such as the Federal Reserve keeping its bond-purchasing program unchanged for much longer, I don’t see Brazilian stocks sustaining a rebound,” Gustavo Mendonca, an economist at Saga Capital, said by phone from Rio de Janeiro.

Brazil Rates

Brazil’s central bank has increased borrowing costs by 2.75 percentage points since April as inflation remained above the government’s 4.5 percent target and deteriorating fiscal accounts sparked investor concern about a possible reduction of the country’s credit rating.

MRV gained 3.5 percent to 8.93 reais.

Plane manufacturer Embraer SA rose 0.3 percent to 17.75 reais after American Airlines ordered 60 aircraft, with options for 90 more. Deliveries will start in the first quarter of 2015, according to a statement from the U.S.-based company.

Brazil’s benchmark equity index entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 28 percent in dollar terms this year, compared with a decline of 6 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo was 5.9 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.46 billion reais this year, according to the latest data available from the exchange.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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