- Oil producer announces investment cuts to shore up finances
- Real posts biggest advance among world's major currencies
The Ibovespa extended its longest rally in 13 months after Petroleo Brasileiro SA, the oil producer at the center of Brazil’s largest graft probe, announced a plan to cut investments as it tries to shore up its finances.
The equity benchmark rose for a sixth day. Petrobras, as Brazil’s state-run oil company is known, advanced to the highest level in three weeks on plans to reduce investments in 2015 to $25 billion from $28 billion. The cut is necessary for the company to be able to re-finance maturing bank loans and bonds in the next few years, according to Bank of America Corp. The oil producer also rose as crude jumped, improving prospects for its offshore production.
“We view the announced changes as a key part of this process and believe it should help to improve investor confidence in the company’s ability to withstand the current, very difficult environment,” Bank of America analysts Frank McGann and Vicente Flanga wrote in a note to clients.
The Ibovespa climbed 0.3 percent to 47,735.11 at the close of trading in Sao Paulo as 38 of its 64 stocks advanced. The real added 1.8 percent to 3.8422, the most among the world’s 16 major currencies. Steelmaker Cia. Siderurgica Nacional SA was the best performer on the gauge.
Brazilian stocks and the real also rose on optimism that government spending cuts will be upheld in a Congressional vote. Lawmakers are scheduled to meet Wednesday in Brasilia after lower house President Eduardo Cunha said they’ll probably uphold President Dilma Rousseff’s vetoes of spending bills that would have boosted the budget deficit.
Mauro Leos, a senior analyst at Moody’s Investor Service, said that the government is showing intention to make progress on strengthening the country’s fiscal accounts.
“Moody’s comments reflect the more positive sentiment among investors that Brazil is doing what it has to do,” Raphael Figueredo, an analyst at brokerage Clear Corretora, said from Sao Paulo. “We still have to see what will really happen and the concern regarding another credit downgrade still weigh over stocks, but the prospects are more encouraging now.”
Standard and Poor’s reduced Brazil’s credit rating to junk last month. The Ibovespa has lost 18 percent since its May peak as the economy heads toward its longest recession since the 1930s.