Brazilian Stocks Rise as Petrobras Gains on Fuel Price Outlook

The Ibovespa climbed for the third time in four sessions as state-run oil company Petroleo Brasileiro SA rallied after deciding against reducing fuel prices.

Cosan SA Industria & Comercio snapped two days of losses as plans for bigger levies on gasoline and diesel made ethanol a more attractive alternative. Steelmakers Cia. Siderurgica Nacional SA and Gerdau SA followed metals higher as economic growth beat forecasts in China, Brazil’s top trade partner. Braskem SA was the worst performer on the gauge, capping the worst two-day decline since 2008.

The Ibovespa increased 0.2 percent to 47,876.66 at the close of trading in Sao Paulo, with 33 of its 68 stocks higher. The benchmark index fell as much as 0.3 percent earlier Tuesday as a gauge of electric utilities dropped. The real appreciated 1.3 percent to 2.6158 per dollar at 5:25 p.m. local time.

“The fact that Petrobras is not cutting prices to make up for higher taxes is a sign that things are different,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by telephone from Rio de Janeiro.

Petrobras, as Petroleo Brasileiro is known, jumped 1.4 percent to 9.32 reais. Cosan surged 4.5 percent to 25.70 reais.

Finance Minister Joaquim Levy announced Monday that Brazil’s government will raise taxes on fuel, imports, credit and cosmetics as part of efforts to restore confidence in its fiscal discipline. The measures will increase revenue by more than 20 billion reais, and Brazil will resume collection of the so-called Cide tax on fuel and raise taxes on loans to individuals and imports.

Investor Confidence

While higher taxes will have a negative impact on economic growth, they help to boost investors’ confidence in the government’s efforts to balance the budget, Freitas said.

CSN gained 5 percent to 5.03 reais while Gerdau advanced 2.2 percent to 9.16 reais.

The Bloomberg Base Metals 3-Month Price Commodity Index added 1.2 percent. China reported that gross domestic product increased 7.3 percent in the fourth quarter from a year earlier, more than the 7.2 percent median estimate from analysts surveyed by Bloomberg.

Centrais Eletricas Brasileiras SA, the state-run power utility known as Eletrobras, sank 5.5 percent to 7 reais. Brazil’s power grid operator restricted electricity distribution during hours of peak use Monday, leading to blackouts in at least nine states.

As demand continues to rise and a drought saps reservoirs feeding hydropower plants, there’s a 35 percent chance that Brazil will have to ration electricity, Banco Itau BBA SA analysts including Paula Kovarsky wrote in report.

Braskem plunged 6.5 percent to 13.15 reais. The stock is down 14 percent in the past two days.

Brazil’s benchmark stock index entered a bear market Dec. 12 after falling 22 percent from last year’s high in September. Trading volume of equities in Sao Paulo was 5.6 billion reais on Tuesday, according to data compiled by Bloomberg. That compares with a daily average of 7.29 billion reais in 2014, according to the exchange.

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