Ibovespa Climbs on Commodities With Correlation at 3-Month High

The Slow Unraveling of Brazil, Explained in Two Minutes
  • Miner Vale, steelmaker CSN among index’s biggest gainers
  • Lender Itau advances after selling life insurance business

Brazil’s Ibovespa rose as iron-ore producer Vale SA and steelmaker Cia. Siderurgica Nacional SA followed gains in raw materials, helping push the stock index’s correlation with commodities toward a three-month high.

CSN, as Cia. Siderurgica is known, was the best performer on the benchmark gauge after newspaper O Globo reported that it plans to sell a stake in its mining unit to China’s CBSteel. The correlation between the Bloomberg Commodity Index and the Ibovespa was 0.62. A reading of one would mean the two move in lockstep.

Commodities have become a bigger driver for the country’s stocks in recent months as investors turned their attention to Brazil’s fundamentals after focusing on political turmoil and the impeachment of President Dilma Rousseff, which sent the Ibovespa to some of the world’s biggest gains this year on optimism a new government would revive growth. Raw-materials companies account for about 23 percent of the Ibovespa’s weighting.

"Commodity producers are very important for the country’s economy," Pablo Spyer, operational director at Mirae Asset Wealth Management, said from Sao Paulo. "The market seems more optimistic with prices of materials."

The Ibovespa added 0.5 percent to 57,350.38 at the close of trading in Sao Paulo as 44 of its 58 stocks advanced. The Bloomberg Commodity Index added 0.4 percent. Vale rose 2.2 percent. CSN, Brazil’s most indebted steelmaker, climbed 6.1 percent.

Lender Itau Unibanco Holding SA contributed the most to the gauge’s advance, rising 0.7 percent, after agreeing to sell its group life insurance business to the Brazilian unit of Prudential Financial Inc.

While a central bank index released Monday showed that economic activity in July contracted more than most analysts had expected, the economy will likely grow in the fourth quarter of the year, Finance Minister Henrique Meirelles told reporters in Sao Paulo. There are already signs that the country is starting to rebound as confidence increases, he added.

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