Ibovespa Leads World Gains as Election Outlook Lifts Petrobras

The Ibovespa climbed the most among the world’s major stock benchmarks as state-run companies including Petroleo Brasileiro SA rallied on speculation the Brazilian soccer team’s World Cup loss may usher in a change in government and bolster the prospect for economic growth.

State-controlled Banco do Brasil SA jumped the most in almost five weeks. Airline Gol Linhas Aereas Inteligentes SA posted its biggest daily rally in 10 months. Phone company Oi SA led declines on concern its merger with Portugal Telecom SGPS SA will be undermined by the Lisbon-based company’s holding of commercial paper from a unit of Espirito Santo International, which failed to make payments on some of its short-term debt.

The Ibovespa added 1.8 percent to 54,592.75 at the close of trading in Sao Paulo as investors wagered that President Dilma Rousseff was less likely to win re-election after Brazil’s lopsided loss to Germany on July 8. The real fell 0.4 percent to 2.2206 per dollar at 5:26 p.m. local time. Sao Paulo markets were closed yesterday for a holiday.

“A defeat like this will definitely not help Dilma,” Luiz Carvalho, a managing partner at New York-based Tree Capital LLC, said by phone. “The worse it gets for her, the better it is for the market. It has been like that, and will continue to be like that, until the elections.”

The Ibovespa entered a bull market on May 7, surging 20 percent from this year’s low, as Petrobras rallied after polls showed declining support for Rousseff. Investors are betting a change in government will reduce intervention in state-owned companies and bolster economic growth.

Banco do Brasil

Banco do Brasil jumped 4 percent to 26.26 reais. Petrobras climbed 4.5 percent to 18.11 reais. State-run Centrais Eletricas Brasileiras SA gained 1 percent to 10.69 reais.

While the elimination from the World Cup tournament doesn’t mean Rousseff will lose the election, Brazil’s “meltdown” might dent her popularity and mean further gains for stocks, according to Citigroup Inc. analyst Stephen Graham.

The defeat “should put her popularity trajectory right back to where it was before the Cup,” Graham wrote in a research note to clients.

Rousseff, who was jeered at the stadium by some disappointed fans, has overseen the slowest economic growth for any Brazilian president in two decades. The loss to Germany dashed Brazil’s hopes of overcoming the national tragedy of losing the final match of the 1950 World Cup at home.

Oi tumbled 14 percent to 1.42 reais, the worst one-day decline since March 2012 and extending losses over the past three days to 20 percent. Portugal Telecom also plunged after Espirito Santo International missed payments on some of its short-term securities. Portuguese government bonds led declines among securities from Europe’s most-indebted nations this week.

Gol jumped 11 percent to 12.96 reais today.

Trading volume of stocks in Sao Paulo was 8.1 billion reais today, according to data compiled by Bloomberg. That level compares with a daily average of 6.45 billion reais this year, according to data from the exchange.

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