JPMorgan’s Call Spurs Petrobras Gain as Brazil’s Stocks Decline

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Petroleo Brasileiro SA, the oil producer at the center of Brazil’s largest graft scandal, climbed after JPMorgan Chase & Co. recommended buying the shares. The Ibovespa fell for a third day on concern the economy will weaken further.

Voting shares of Petrobras extended this month’s advance after the New York-based bank cited management’s efforts to improve investors’ confidence. JPMorgan’s call came after a report on Friday that said billionaire investor George Soros’s firm sold its entire stake in the state-run company.

Petrobras last month reported earnings that beat analysts’ estimates after a fuel price increase allowed its refining and supply unit to turn profitable. Chief Executive Officer Aldemir Bendine, who replaced Maria das Gracas Silva Foster in February, is seeking to contain damage from a decade of alleged kickbacks with plans to cut the industry’s heaviest debt load and retain an investment-grade credit rating.

“The changes in Petrobras’s management and the intention to reduce leverage have supported more optimism from investors,” Rafael Ohmachi, an analyst at brokerage Guide Investimentos, said by phone from Sao Paulo.

Since Bendine took office on Feb. 6, Petrobras voting shares have surged 57 percent. That compares with an 8.9 percent gain for the Ibovespa. The benchmark gauge fell 0.4 percent to 53,137.53 at the close of trading in Sao Paulo while Petrobras shares extended this month’s gain to 7.2 percent.

‘More Constructive’

It’s time for a “more constructive” approach toward Petrobras, Marcos Severine, an analyst at JPMorgan in Sao Paulo, wrote in a note to clients, as he raised his recommendation on the shares from neutral. “The controlling shareholder not only has the capability, but is eager to improve investors’ perception.”

The oil producer is considering including fields from its fastest-growing deepwater oil region in a divestment plan to raise money for expenditures and debt payments, six people with knowledge of the proposal said in April. The company surprised investors this month with the sale of $2.5 billion of 100-year bonds, making it the first emerging-market company to issue such long-dated notes since 1997.

The release of audited Petrobras results after a five-month internal debate on graft writedowns helped send the Ibovespa into a bull market in April, following a rally of more than 20 percent from its 2015 low. Since then, the gauge has slipped 6.1 percent amid bets the economy will slow further.

Economic Forecast

Analysts raised their 2015 inflation forecast by more than a quarter-point and lowered their outlook for economic activity as policy makers raise borrowing costs, according to the June 12 central bank survey published Monday. They now predict gross domestic product will contract 1.35 percent this year before expanding 0.9 percent in 2016.

“The scenario is very negative for the economy and stocks,” said Pablo Spyer, a director at Mirae Asset Wealth Management in Sao Paulo, which oversees 4.5 billion reais ($1.45 billion). “We don’t see any improvement soon.”

Concern over a further economic slowdown helped push consumer stocks lower as brewery Ambev SA sank. Vale SA, the world’s largest iron-ore producer, slumped with iron ore.

Embraer SA extended a four-day rally as the planemaker opened the Paris Air Show by winning $2.6 billion in firm orders for regional jets among customers including U.S. lessor Aircastle Ltd. and United Continental Holdings Inc.

Options on the Ibovespa’s stocks expired Monday. Trading volume of equities in Sao Paulo was 5.77 billion reais, data compiled by Bloomberg show. That compares with a daily average of 6.93 billion reais this year, according to the exchange.

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