Ibovespa Snaps Two-Day Drop as Tim Leads Phone Companies Higher

The Ibovespa snapped a two-day rout as Tim Participacoes SA rallied after Telecom Italia SpA was said to be negotiating the sale of its controlling stake in the phone carrier, outweighing a drop in commodity exporters.

The MSCI Brazil/Telecommunication Services Index was the best performer among 10 industry groups as Telefonica Brasil SA gained the most in two weeks. Smiles SA, the company that manages Gol Linhas Aereas Inteligentes SA’s frequent-flier program, rose for the first time in seven sessions after it agreed to buy a 25 percent stake in Netpoints Fidelidade SA. Vale SA sank to a two-month low, following a drop in raw-material prices.

The Ibovespa climbed 0.4 percent to 52,547.71 at the close of trading in Sao Paulo, with 52 of its 73 member stocks rising. The real strengthened 0.2 percent to 2.2062 per dollar at 5:19 p.m. local time.

“If Tim is sold to one of its rivals, that in theory would mean less competition in the industry,” Sandro Fernandes, a trader at brokerage firm Geraldo Correa, said by phone from Belo Horizonte, Brazil. “All we have for now is talks, but at a time when things such as the U.S. debt-ceiling issue bring so much uncertainty to the markets, that’s enough to move the stocks.”

Tim gained 6.7 percent to 11.63 reais. Telecom Italia is seeking at least 9 billion euros ($12 billion) for its controlling stake in the company, according to a person with knowledge of the matter who asked not to be identified because the discussions are private. The stock pared an earlier gain of as much as 10 percent after the Italian company said in a statement that “there is no formal or informal process ongoing for the disposal of its interest in Tim Participacoes.”

U.S. Deadlock

Telefonica Brasil added 2.9 percent to 47.96 reais. Oi SA climbed 2.4 percent to 3.79 reais. Smiles added 2.6 percent to 27.40 reais.

The Ibovespa earlier fell as much as 0.7 percent as a drop in commodities prices pushed raw-material producers lower while U.S. lawmakers remained deadlocked over raising the government’s borrowing limit, spurring concern that global growth may falter.

The U.S. Treasury Department has said steps to avoid breaching the debt ceiling will be exhausted by Oct. 17. A default could “seriously damage” the world economy, the International Monetary Fund said yesterday as it lowered global growth estimates for this year and next.

‘Very Cautious’

“Politicians in the U.S. are taking too long to solve this debt-limit issue, which is making everyone very cautious,” Luis Gustavo Pereira, a strategist at Futura Corretora brokerage, said in a phone interview from Sao Paulo.

The Standard & Poor’s GSCI index of 24 raw materials dropped 1.1 percent. Vale sank 2.3 percent to 30.47 reais, the lowest in two months. Commodity producers account for 37 percent of the Ibovespa’s weighting.

Brazil’s benchmark stock gauge entered a bull market Sept. 9 after rising 20 percent from this year’s low on July 3 through that day. The gauge is still down 20 percent in dollar terms this year, compared with a decline of 4.7 percent for the MSCI Emerging Markets Index of 21 developing nations’ equities.

Trading volume of stocks in Sao Paulo today was 6.29 billion reais, according to data compiled by Bloomberg. That compares with a daily average of 7.61 billion reais this year through Oct. 7, according to data from the exchange.

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