Ibovespa Rises as Itau Leads Banks Higher Amid Earnings Outlook

The Ibovespa rallied the most in two months as Itau Unibanco Holding SA led lenders higher on speculation the industry is better prepared to go through a period of lower growth in Brazil.

Mining company Vale SA had the biggest gain in a month. Homebuilder Direcional Engenharia SA dropped as its profit trailed estimates.

The Ibovespa increased 2.9 percent to 50,285.12 at the close of trading in Sao Paulo, its biggest advance since Jan. 7. The gauge is still down 19 percent in dollar terms in 2015, the most among major equity benchmarks, on speculation that a stalled economy and fiscal weakness will lead to a sovereign credit downgrade. A measure of financial stocks in the MSCI Brazil gauge extended a two-day rally to 4.5 percent on Tuesday.

“Banks are seen as defensive stocks,” amid an economic slowdown, Hersz Ferman, an economist at brokerage firm Elite Corretora, said in a phone interview from Rio de Janeiro. “Lenders are able to profit even in the worst of scenarios.”

Itau added 2.9 percent to 34.80 reais. Vale climbed 4.6 percent to 17.19 reais. The real gained 0.4 percent to 3.2327 per dollar after weakening as much as 1.2 percent earlier.

Direcional declined 3.7 percent to 5.93 reais. Adjusted net income was 60.7 million reais ($18.8 million) in the fourth quarter, compared to the average estimate of 65.3 million reais among four analysts surveyed by Bloomberg.

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