Brazilian Stocks Advance as China Optimism Buoys Export Outlook

  • Iron-ore producer Vale leads gains on Ibovespa benchmark
  • Sales abroad may help to boost results as local growth falters

Brazilian stocks rose for a third day, with the Ibovespa benchmark gaining to a one-week high, as commodities producers rallied on optimism that Chinese government efforts to ease an economic slowdown are working.

Iron-ore producer Vale SA’s biggest gain in a month contributed the most to the stock gauge’s advance. Meatpacker Marfrig Global Foods SA sank the most since April 2013 after its offices were raided by police investigating corruption.

Exporters in Brazil are counting on foreign sales to cushion results as Latin America’s biggest economy is forecast to post its longest recession since the 1930s amid a corruption scandal, political infighting and credit-rating cuts. Companies including Vale, pulpmaker Fibria Celulose SA and meatpacker JBS SA are also benefiting after Brazil’s real tumbled 34 percent this year. The pace of the slowdown in Chinese factory output unexpectedly eased in September, a report showed Thursday, easing concern the world’s second-biggest economy will act as a drag on global growth.

"The good news is that manufacturing data in China was a little better than expected," Hersz Ferman, an economist at brokerage Elite Corretora, said from Rio de Janeiro. "Prospects for the international markets definitely seem more positive than the domestic scenario."

The Ibovespa rose 0.6 percent to 45,313.27 at the close of trading in Sao Paulo. The index has dropped 40 percent this year in dollar terms, the most among major stock gauges, as investors focus on Brazil’s tumultuous politics. Lawmakers passed a measure Wednesday that will increase government spending on retirees and delayed until Oct. 6 a debate on whether to try to overturn presidential vetoes from earlier this year on bills that boost public spending.

President Dilma Rousseff has been struggling to get approval for budget cuts and tax raises she says are needed to avoid another junk rating after Standard & Poor’s reduced its classification last month. Fitch Ratings said Sept. 28 the probability of Brazil losing its BBB grade is higher than 50 percent.

"Investors are waiting to see if proposed spending cuts and tax raises will pass," Ricardo Kim, an economist at the brokerage XP Investimentos, said from Sao Paulo. "That’s the most important variable to get an idea of where the market is going."

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