- Benchmark stock gauge joins gains in emerging-market shares
- Currency erases rally as veto decision delayed in Congress
Brazilian stocks extended their longest advance in 18 months as emerging-market shares climbed with commodities. The real declined after the government was unable to secure the necessary quorum in Congress to hold a vote on presidential spending vetoes.
The equity benchmark rose for a seventh day on speculation the Federal Reserve will keep interest rates lower for longer, helping boost the appeal of developing nations. An MSCI gauge of raw-material producers gained the most among 10 industry groups, led by miner Vale SA. The real slid after lawmakers ended a session without voting on Rousseff’s vetoes of measures that would boost some government salaries and pension payouts and cost 63 billion reais ($16 billion) over four years.
The increasing global appetite for riskier assets offset mounting political tension in Brazil, where the president’s record-low popularity is imperiling efforts to win support for measures to shore up the budget and avoid another credit downgrade. Emerging-market stocks have surged since the end of the third quarter as speculation builds the Fed will hold off raising interest rates this year to shield the economy.
"This global mood is supporting Brazil," Joao Paulo de Gracia Correa, a foreign-exchange manager at SLW Corretora de Valores, said from Curitiba. "However, underlying fundamentals in Brazil haven’t changed and the political crisis remains a burden. We should expect volatility in trading."
The Ibovespa rose 2.5 percent to 48,914.32 at the close of trading in Sao Paulo, the biggest gain in the Americas. Lenders Itau Unibanco Holding SA and Banco Bradesco SA surged, while Vale jumped 10 percent. The real lost 0.9 percent to 3.8862 per dollar, after climbing 1.7 percent Wednesday.
Of the 513 deputies in the lower house, 218 showed up for the vote, which requires at least 257 deputies to start. Rousseff’s administration has been negotiating with lawmakers for weeks to win their support, arguing the measures would strain government finances. Her efforts to trim spending and raise taxes have met resistance from lawmakers concerned the moves will hurt Brazil’s middle class.
"The fact that the Congress did not reach the minimum quorum adds bad sentiment,” said Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo.
Brazilian courts are expected to rule this week on alleged irregularities in Rousseff’s campaign financing and the government’s 2014 budget, which could be grounds for impeachment amid record-low popularity.
Consumer prices rose more than economists forecast in September as traders wager the central bank won’t be able to avoid raising borrowing costs again to tame above-target inflation. Brazil’s annual inflation is running at more than double the official target, fanned by the biggest currency depreciation in emerging markets tracked by Bloomberg. Price indexes will face renewed pressure after Petroleo Brasileiro SA increased prices of gasoline and diesel.
Swap rates on the contract maturing in January 2017, a measure of expectations for interest-rate moves, rose 0.25 percentage point to 15.48 percent.