Ibovespa Rises as Brazilian Rate Outlook Bolsters Gafisa

The Ibovespa equity benchmark rallied to a six-week high as Brazilian homebuilders and retailers advanced on speculation that policy makers will limit interest-rate increases this year.

Gafisa SA and PDG Realty SA Empreendimentos & Participacoes led gains by builders. Banco do Brasil SA rose the most among financial stocks as concern eased that government pressure on banks to reduce loan rates will curb earnings. ALL America Latina Logistica SA climbed after the railroad company reported a first-quarter profit that exceeded analysts’ estimates.

The Ibovespa rose 1.5 percent to 56,274.66 at the close of trading in Sao Paulo with 59 of its 71 stocks stocks higher. It was the best performance among major emerging market equity benchmarks after Argentina’s Merval. The MSCI Brazil/Financials index gained the most in 11 weeks as nine out of 10 industry groups advanced. The real strengthened and swap rates fell before a report tomorrow that is forecast to show annual inflation slowed in April.

“The latest inflation figures weren’t so bad,” Luis Gustavo Pereira, an analyst at Futura Corretora in Sao Paulo, said in a telephone interview. “It doesn’t look like we’re going to see increases steep enough to have a negative impact on equities.”

The central bank board voted 6-to-2 last month to increase the benchmark rate to 7.50 percent from a record low 7.25 percent, saying in its statement that the “resilience of inflation” required action.

Gafisa, Banco do Brasil

Gafisa advanced 4.1 percent to 4.05 reais. PDG gained 4.1 percent to 2.27 reais. Online retailer B2W Cia. Digital added 3.2 percent to 11.76 reais.

Banco do Brasil climbed 4.3 percent to 25.41 reais. Competitor Banco Bradesco SA gained 3 percent to 33.40 reais, the highest since April 16.

Financial stocks gained on speculation that President Dilma Rousseff’s pressure on banks to lower lending rates and fees is not hurting profitability, said Henrique Kleine, the head analyst at Sao Paulo-based Magliano SA brokerage.

State-controlled Banco do Brasil and Caixa Economica Federal last year reduced borrowing costs, cut banking fees and boosted lending after Rousseff urged banks to reduce profits to “civilized” levels.

“Earnings reports are showing that, despite all the noise we’ve seen in this sector, banks managed to post good results,” Kleine said by phone from Sao Paulo.

Two of the three lenders on the Ibovespa that have already reported first-quarter earnings exceeded analysts’ estimates, according to data compiled by Bloomberg. Banco do Brasil is scheduled to release its results on May 15.

ALL Earnings

The real strengthened 0.1 percent to 2.0078 per dollar. Swap rates on contracts due in January 2015 dropped 0.05 percentage point to 8.19 percent.

ALL rose 2.4 percent to 10.60 reais. The company posted adjusted net income of 33.9 million reais in the first quarter, more than the 24.6 million real average from three analysts surveyed by Bloomberg.

The Ibovespa has retreated 11 percent from this year’s peak on Jan. 3. The MSCI BRIC Index of shares in Brazil, Russia, India and China has lost 4.1 percent over the same period.

Brazil’s main equity gauge trades at 12.5 times analysts’ earnings estimates for the next four quarters, compared with 10.7 for the MSCI Emerging Markets Index of 21 developing nations’ equities, data compiled by Bloomberg show.

Trading volume for stocks in Sao Paulo was 7.25 billion reais today, according to data compiled by Bloomberg. That compares with a daily average of 7.71 billion reais this year through April 30, according to data compiled by the exchange.