Petrobras Gains With Ibovespa on Report Investments to Sink 40%

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Petroleo Brasileiro SA, the oil producer at the center of Brazil’s largest graft probe, led gains in the Ibovespa on speculation the company will reduce investments by 40 percent.

The shares extended this month’s rally after O Estado de S.Paulo reported, without saying how it got the information, that Petrobras plans to trim its 2015-2019 investments to $130 billion. Chief Executive Officer Aldemir Bendine is seeking to contain damage from a decade of alleged kickbacks by cutting the industry’s heaviest debt load and retaining an investment-grade credit rating.

“The next driver for Petrobras is the investment plan,” Joao Pedro Brugger, an economist at Leme Investimentos, which manages 600 million reais ($193.5 million), said by phone from Florianopolis, Brazil. “They had a grandiose investment plan, which was out of sync with what’s happening with the company.”

Bendine’s efforts to restore credibility remains a challenge as crude prices are near a six-year low and the company keeps missing production targets. Petrobras will discuss its five-year business plan and potential asset sales at a meeting set for Friday, a board member said June 23. The company is still deciding on its investment plan, according to a filing Wednesday.

The Ibovespa rose 0.1 percent to 53,842.54 at the close of trading in Sao Paulo, bringing this month’s gain to 2.1 percent. Petrobras has jumped 7.1 percent so far in June.

Inflation Report

Some companies that depend on domestic demand fell on Wednesday as Brazil’s central bank signaled higher interest rates to slow inflation even as the economy is on pace for the worst contraction in 25 years.

Consumer prices will rise 9 percent in 2015, when inflation then set to slow to 4.8 percent by the end of 2016, if the benchmark Selic rate remains at 13.75 percent, according to the reference outlook in a quarterly report published Wednesday. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.

“The inflation report had a very harsh tone, coherent with the recent line the central bank has been using,” Brugger said. “It signals at least two more rate increases, with the central bank committed to bringing inflation back to the target.”

Retailer Lojas Americanas SA fell 2 percent, the most in almost three weeks, and competitor Via Varejo SA lost 3.8 percent, the worst performer on the MSCI Brazil/Consumer Discretionary Index.

Trading volume of equities in Sao Paulo was 5.65 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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