Ibovespa Climbs to 10-Week High as Metals Gain Adds to Optimism

  • Better outlook for commodities and local demand lifts Ibovespa
  • Economists now expect shallower downturn in Brazil economy

The Ibovespa stock index reached a 10-week high as optimism on global growth bolstered metal prices and after economists forecast a faster recovery from Brazil’s economic downturn.

Vale SA joined a worldwide rally in mining companies after Citigroup Inc. said it’s bullish on raw materials. State-controlled Petroleo Brasileiro SA, known as Petrobras, contributed the most to the gauge’s gains after announcing its oil and gas production rose to a record high. Commodity producers account for 21 percent of the Ibovespa’s weighting.

"Bigger exports would be the icing of the cake as the market now anticipates the improvement in local activity too," said Raphael Figueredo, an analyst at brokerage Clear Corretora in Sao Paulo.

Economists in the central bank’s weekly survey expect the economy to contract 3.3 percent this year, compared to the 3.71 percent slump they forecast at the beginning of June. The government of Acting President Michel Temer last week announced a plan to cut next year’s budget deficit by more than analysts had expected, buttressing hopes that the new government can restore confidence in the region’s biggest economy.

Over the weekend, Temer and Finance Minister Henrique Meirelles provided more details on the administration’s plan to sell assets, after growing budget deficits cost Brazil its investment-grade status last year. Retailer Cia. Brasileira de Distribuicao SA was the best performer among companies that depend on local demand.

The Ibovespa advanced 1.5 percent to 53,960.11 at the close of trading in Sao Paulo, its highest close since April. All but 11 of its 59 stocks advanced. Vale added 3.7 percent, and Petrobras climbed 5.3 percent. Cia. Brasileira de Distribuicao gained 3.2 percent.

For-profit college manager Estacio Participacoes SA rose after its board approved an improved takeover offer from Kroton Educacional SA that will create one of the biggest for-profit education companies in the world, with about 1.6 million students.

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