Bovespa Rises Amid Speculation Stronger Real to Curb Inflation

The Bovespa index rose, paring its first monthly drop since October as Hypermarcas SA led consumer stocks higher on reduced concern that Brazil’s inflation will accelerate, outweighing a drop by Petroleo Brasileiro SA.

Hypermarcas, the maker of more than 180 products ranging from pharmaceuticals to diapers, was the best performer on the benchmark. Retailer Cia. Brasileira de Distribuicao Grupo Pao de Acucar rose the most in six months. Petrobras, as Petroleo Brasileiro is also known, dropped for a fourth day amid speculation an increase in fuel prices will be insufficient to boost profits.

The Bovespa rose 0.7 percent to 59,761.49 at the close of trading in Sao Paulo, trimming this month’s decline to 2 percent. Forty-nine stocks advanced on the gauge today while 18 fell.

“The government is doing everything it can to control inflation,” Sandro Fernandes, a trader at brokerage Corval, said by phone from Belo Horizonte, Brazil. “The goal seems to be to use all tools possible so the central bank doesn’t have to raise interest rates. It’s all in the name of economic recovery.”

The real gained 3 percent this month after the government removed a tax on foreign investment in real estate funds and the central bank sold foreign-exchange swap contracts to boost the currency. It weakened 0.1 percent to 1.9915 per U.S. dollar today.

Stocks linked to Brazil’s domestic demand advanced on speculation a stronger real will help to curb inflation, giving policy makers more room to hold borrowing costs at a record low for longer. Hypermarcas climbed 5 percent to 17.20 reais. Pao de Acucar gained 4.2 percent to 93.90 reais.

Vale Rises

Vale SA, the world’s largest iron-ore producer, climbed 3.8 percent to 38.70 reais after Bank of America Merrill Lynch raised the stock to an equivalent of buy from hold.

The Bovespa dropped as much as 0.4 percent earlier today as Petrobras slipped 0.7 percent to 18.08 reais in its fourth day of declines. The stock fell 7.4 percent this month.

The state-controlled producer this week increased gasoline prices at refineries by 6.6 percent and diesel by 5.4 percent as it seeks to eventually eliminate the discount between domestic and international prices. The adjustment will reduce the price gap for gasoline to 11.8 percent and diesel to 12.2 percent, according to a research note from Banco Bradesco SA’s analysts led by Auro Rozenbaum.

OGX Petroleo & Gas Participacoes SA dropped 6.2 percent to 4.10 reais, leading declines on the Bovespa.

Bull Market

Brazil’s benchmark equity gauge entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5 as stimulus from central banks around the world eased concern that economic growth might miss expectations while borrowing costs at a record low in Brazil boosted equity demand. The index has since pared its advance to 14 percent.

The Bovespa trades at 11 times analysts’ earnings estimates for the next four quarters, compared with 10.9 for MSCI’s measure of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 9.05 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.17 billion reais this year through Jan. 29, according to data compiled by the exchange.

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