The Ibovespa led gains among major stock benchmarks as Vale SA jumped after Morgan Stanley forecast an iron ore rally amid easing supply prospects.
Vale, which said on Thursday it may cut output from its most expensive mines, extended a two-day advance to 13 percent. Petroleo Brasileiro SA, the oil producer at the center of Brazil’s largest corruption probe, advanced to a five-month high as the government considers a regulatory relief.
The Ibovespa rose 2 percent to 57,353.98 at the close of trading in Sao Paulo, the highest level since Oct. 14. The gauge rallied even as analysts covering the Brazilian economy forecast a deeper recession than previously expected. Iron ore, which sank to a 10-year low at the start of April, extended the biggest monthly gain in almost two years.
“The market is betting that iron prices will continue rising, benefiting Vale,” Fernando Goes, an analyst at brokerage firm Clear Corretora, said by phone from Sao Paulo. “The stock is attractive and has room to gain more in the next few days, spurring gains in the Ibovespa.”
The benchmark entered a bull market April 24, after jumping more than 20 percent from this year’s low, on bets spending cuts and the release of Petrobras results would be enough for Brazil to avoid a credit rating downgrade.
Vale, the world’s largest iron-ore producer, rallied 6.3 percent to 19.30 reais, a two-month high. Ore with 62 percent content at Qingdao rose 2.4 percent to $57.55 a dry metric ton on Monday, according to data on the website from Metal Bulletin Ltd.
“Competitive supply growth in this market appears to be ending,” Morgan Stanley analyst Tom Price wrote in a report on Monday. “This creates upside risk for prices.”
Petrobras advanced 5.7 percent to 13.80 reais. Any changes to regulations for the so-called pre-salt area will have to go through Congress with lawmakers “open to alternatives,” Energy Minister Eduardo Braga said Sunday in an interview in Houston before the Offshore Technology Conference. The government is also giving Petroleo Brasileiro SA freedom to set fuel prices, he said.
Investors have piled into Petrobras shares after Chief Executive Officer Aldemir Bendine, who took over in February, announced plans to sell $13.7 billion in assets this year and next to cut debt. The oil producer also reported its 2014 results April 22, ending a five-month debate on writedowns related to the corruption scandal.
“There have been lots of good news for Petrobras lately, so it’s rallying and supporting the Ibovespa together with Vale,” Lauro Vilares, an analyst at brokerage firm Guide Investimentos, said in a phone interview from Sao Paulo.