Ibovespa Posts Best Advance in Americas as Real Climbs on China

  • Petrobras, Vale, Itau lead gains in benchmark stock gauge
  • Brazil's currency swings are widest among 16 major tenders

The Ibovespa rallied the most in the Americas, led by Petroleo Brasileiro SA, and the real rose on speculation that China is making efforts to bolster its economy. Brazil’s bond risk extended a slide from the highest level since 2009.

Brazilian stocks joined gains in developing nations after people familiar with the matter said the nation’s top trading partner stepped in to shore up domestic equities, following a rout that erased $8 trillion from global markets. Commodity producers, which account for about a quarter of the Ibovespa, soared as Petrobras and Vale SA climbed at least 8.6 percent. Shares also rose after data showed the U.S. economy grew more than estimated. The real appreciated for a second day, and posted the widest one-month swings in the world.

“Any sign that China is trying to support the economy will bring relief to investors,” Ari Santos, a trader at brokerage H. Commcor, said from Sao Paulo. “However, I don’t think this rally has any legs given all the challenges that we’re facing right now.”

Global Markets

The advance in Brazilian stocks halted a selloff that’s engulfed global markets since China devalued its currency on Aug. 11, stoking concern the slowdown in the second-largest economy threatened world growth. The Ibovespa is still poised for a monthly slide as President Dilma Rousseff struggles to revive an anemic economy and keep the nation’s investment-grade status amid a sweeping graft scandal at the state-run oil company.

The Ibovespa added 3.6 percent to 47,715.27 at the close of trading in Sao Paulo, extending a three-day advance to 7.6 percent. The real rose 1.2 percent to 3.5537 per dollar. The cost of protecting Brazil’s bonds against nonpayment using five-year credit-default swaps fell to 3.28 percentage points, after surging to a six-year high on Monday.

Itau, Bradesco

All 10 groups in the MSCI Brazil index rallied at least 3.2 percent, led by commodity companies. Oil producer Petrobras contributed the most to the Ibovespa’s advance. Vale, the world’s largest iron-ore producer, posted the biggest increase since April. Lender Itau Unibanco Holding SA extended a two-day surge to 9.8 percent.

While the real won’t probably rebound to the same levels at the beginning of this year, the currency at 3.60 per dollar is seen as “too cheap,” according Tim Condon, the chief economist for Asia Research at ING Bank.

"The selloff is overdone and markets will come back," he said in an interview in Sao Paulo. "There should be a recovery before the end of the year.”

Gains in the real were limited earlier Thursday by concern political gridlock may increase after Finance Minister Joaquim Levy and Planning Minister Nelson Barbosa were said to disagree on a 2016 budget bill that should be sent to Congress by Aug. 31. While Levy prefers focusing on reducing expenses, Barbosa aims to increase the government’s revenue by raising taxes, according to a government official with knowledge of the talks.

Moody’s Investors Service cited lack of political consensus on attempts to repair government finances as well as a faltering economy when it lowered Brazil to the lowest level of investment grade this month. Standard & Poor’s last month cut its outlook for the nation, moving a step closer to reducing its credit rating to junk.

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