The Ibovespa led gains in the Americas after Vale SA predicted a pickup in Chinese demand for iron ore, following a slump in prices for the steelmaking ingredient to a decade low.
Shares of the world’s largest producer of the commodity rose for the first time in five days after Chief Executive Officer Murilo Ferreira said supplies are set to tighten in the second half of 2015 as China imports more and produces less. Iron ore has surged 39 percent from its April low on prospects of a rebound in steel demand as high-cost mines close.
Brazilian raw-material companies from Vale to steelmaker Cia. Siderurgica Nacional SA had dropped over the past year on speculation that demand from the biggest metals consumer was faltering. While China’s imports of commodities including oil and copper slid last month, analysts forecast data Thursday will show a rebound in both industrial output and retail sales.
“China has been a key factor in the improvement in commodity prices,” Otavio Vieira, who helps oversee 250 million reais ($81 million) as a partner at Fides Asset Management, said by phone from Rio de Janeiro. “Iron ore is climbing and seems to have stabilized, and that helps Vale a lot. Commodities are still the drivers for the Ibovespa.”
The rally in raw-material shares, which account for a quarter of the benchmark gauge, offset pessimism with a report showing Brazil’s inflation unexpectedly accelerated in May. The Ibovespa rose 2 percent to 53,876.45 at the close of trading in Sao Paulo, climbing for a second day.
Vale jumped 4.8 percent. Petrochemicals maker Braskem SA added 2.7 percent, while state-run Petroleo Brasileiro SA joined an advance in crude oil.
“Several Chinese producers -- a higher number than people realize -- have already left the business,” Vale’s Ferreira said Wednesday at a Rio de Janeiro conference. “We will have a better second half in China than the first half in terms of steel.”
Banks also helped push the Ibovespa higher. Banco Bradesco SA recovered from an 11-month low while Itau Unibanco Holding SA rallied 2.9 percent. Still, Fides’ Vieira said the advance in Brazilian stocks may not be sustained as Latin America’s largest economy continues to disappoint.
Inflation has accelerated as President Dilma Rousseff’s administration boosts government controlled prices to shore up public accounts. That has sent annual consumer prices rising at the fastest pace in more than a decade, and the central bank has responded by boosting borrowing costs six consecutive times.
Bets on a further slowdown at a time when the economy is already forecast to show the worst recession in 25 years have dragged down the Ibovespa from this year’s high. The benchmark gauge had entered a bull market April 24, after rallying more than 20 percent from its 2015 low, on speculation government measures would revive growth and help Brazil keep its investment-grade credit rating.
Trading volume of equities in Sao Paulo was 7.9 billion reais on Wednesday, according to data compiled by Bloomberg. That compares with a daily average of 6.95 billion reais this year, according to the exchange.