- Itau, Ambev, Vale contribute most to benchmark gauge's advance
- Equities also rise as speculation eased Levy is leaving post
Brazil’s stocks led gains in the Americas after the central bank kept borrowing costs unchanged, bolstering the outlook for companies that depend on local demand.
The benchmark gauge climbed after policy makers halted a streak of seven straight increases in the Selic rate amid forecasts Latin America’s largest economy is heading toward the longest recession since the 1930s. Equities also gained as speculation eased that Finance Minister Joaquim Levy was preparing to leave his post amid budget turmoil.
Brazilian equities entered a bear market last month, after slumping more than 20 percent from this year’s peak in May, as President Dilma Rousseff struggles to revive an anemic economy, shore up the budget and avoid a credit rating downgrade to junk. Higher borrowing costs have reduced both consumer and business confidence, without bringing inflation to the target.
“Another increase in interest rates would have been very negative as the economy is already showing so much weakness,” Pablo Spyer, a director at Mirae Asset Wealth Management, said from Sao Paulo. His firm overseas 4.5 billion reais ($1.2 billion).
The Ibovespa added 1.9 percent to 47,365.87 at the close of trading in Sao Paulo, led by lender Itau Unibanco Holding SA and brewery Ambev SA. Vale SA, the world’s largest iron-ore producer, climbed with commodities. While the benchmark is trading in line with a measure of developing-nation stocks, its valuation is about 6 percent lower than the average for the past 12 months.
Stocks briefly trimmed gains after Valor Economico newswire reported that Levy had canceled his trip to attend G-20 conference in Turkey. The finance ministry press office later confirmed the information. Rousseff told reporters this week that Levy isn’t isolated even after several of his recent proposals aimed at avoiding a sovereign credit-rating downgrade were blocked.
“Levy is Brazil’s best hope for keeping its investment-grade status,’’ said Ari Santos, a trader at Sao Paulo-based brokerage H.Commcor. “If he quits, equities will surely take a big plunge.”
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 last month. Standard & Poor’s cut its outlook for the nation in July, moving closer to reducing its credit rating to junk.
Stocks also joined a global advance after the European Central Bank vowed to use all tools available to support a recovery that it sees hindered by the recent turmoil in emerging markets.