The Ibovespa climbed for a seventh straight day in its longest rally since August as a gain in the price of metals overshadowed a reduction of Brazil’s credit rating by Standard & Poor’s.
Vale SA, the world’s largest iron-ore producer, contributed the most to the benchmark equity gauge’s advance. Centrais Eletricas Brasileiras SA declined after S&P lowered the power utility’s rating. JBS SA, the world’s biggest beef producer, led losses on the index after reporting earnings that missed analysts’ estimates.
The Ibovespa advanced 0.4 percent to 48,180.14 at the close of trading in Sao Paulo. Forty-two stocks increased while 28 dropped. The real appreciated 0.5 percent to 2.3111 per U.S. dollar at 5:35 p.m. local time. The Bloomberg Base Metals 3-Month Price Commodity Index advanced 1.3 percent on speculation China will take additional measures to support growth.
“Markets all over the world today are more optimistic about China’s government acting to boost its economy, which would mean a lot of help for the global economy,” Pedro Paulo Silveira, the executive director at Vetorial Asset Management, said in a phone interview from Sao Paulo. “The downgrade of Brazil by S&P was expected and already priced in stocks.”
A Purchasing Managers’ Index for China dropped to 48.1 in March from February’s final reading of 48.5, according to preliminary data published this week by HSBC Holdings Plc and Markit Economics. Numbers below 50 signal contraction.
S&P reduced Brazil’s credit rating after the market closed yesterday to BBB-, the lowest investment grade, citing sluggish economic growth and expansionary fiscal policies that increased debt. The change is “inconsistent with the solidity and the fundamentals of Brazil,” the Finance Ministry said in an e-mailed statement.
Vale climbed 1.7 percent to 27.61 reais. Steelmaker Usinas Siderurgicas de Minas Gerais SA gained 2.6 percent to 9.95 reais, leading advances on the MSCI Brazil/Materials Index, which was up 1.5 percent. Voting shares of Eletrobras fell 1.9 percent to 5.81 reais.
The S&P ranking of Brazil is two levels below Mexico, one level below Russia and in line with Spain and the Philippines. Brazil will keep responding in a robust way to the challenges that are seen in the new international context, the central bank said in an e-mail statement today.
“The downgrade is very bad news because it will make investors more cautious about Brazilian equities and also means worse prospects for companies, as it will be harder for them to get financing,” Alvaro Bandeira, a partner at Orama Asset Management, said by phone from Rio de Janeiro.
Medical diagnostics company Diagnosticos da America SA rose to a one-week high as quarterly earnings exceeded estimates. The shares gained 2 percent to 14.99 reais, its highest price since March 14.
JBS dropped 5 percent to 7.48 reais, the biggest one-day decline since Feb. 18.
Brazil’s benchmark equity gauge entered a bear market March 14 after falling 20 percent from its October high through that day. The gauge has since pared the drop to 15 percent. Trading volume of stocks in Sao Paulo was 5.8 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 6.38 billion reais this year, according to data from the exchange.