Brazilian Stocks, Real Join Global Rally Amid China Speculationby and
Vale surges while steelmaker CSN extends six-day advance
Currency rebounds from lowest level since October 2002
Brazil’s stocks and the real joined a global rally amid speculation that the country’s top trading partner will take further measures to boost growth.
The benchmark gauge erased this month’s slide as China’s equities climbed in the last hour of trading, spurring bets the government will prop up the market after data showed a slowdown in the Asian nation’s exports. Commodity shares in the MSCI Brazil Index advanced the most among 10 industries, led by miner Vale SA. The real rebounded from a 12-year low.
“Brazil is surfing the wave of global optimism,” Alvaro Bandeira, an economist at Banco Modal, said from Rio de Janeiro. “Bets on further Chinese support are bringing some relief to our exporters, at least in the short term.”
The Ibovespa added 0.6 percent to 46,762.07. Vale and steelmaker Cia. Siderurgica Nacional SA followed iron ore higher. The real rose 0.6 percent to 3.8208 per dollar. Swap rates on the contract maturing in January 2017, a gauge of expectations on interest-rate moves, declined 0.18percentage point to 14.86 percent.
Stocks and the real also rose after Finance Minister Joaquim Levy said on Saturday that he hasn’t discussed resigning his position, reacting to speculation that he may leave the post amid struggles to push through measures designed to avoid a sovereign credit rating downgrade. Brazilian markets were closed on Monday for a national holiday.
"Investors understood Levy’s still fighting to improve Brazil’s financial accounts and save the economy," Filipe Borges, an analyst at brokerage Solidez Corretora, said from Sao Paulo. "Any news on this front will be closely followed by the market in the next few days."
The Ibovespa entered a bear market last month, after tumbling 20 percent from this year’s high in May, as the government struggles to shore up the budget amid forecasts for the longest recession since the 1930s. Analysts see a contraction of 2.44 percent for the gross domestic product this year and of 0.5 percent next year, according to a weekly survey by the central bank released Monday.
Brazil could pull Latin America into contraction, Shelly Shetty, a senior director at Fitch Ratings, said in a conference in London on Tuesday. She sees no recovery for the region’s largest economy until 2017 and cited the weak growth, fiscal challenges and debt as posing the largest risks to the country’s rating. The nation is ranked by Fitch at the second-lowest level of investment grade.
Brazil auctioned a foreign exchange credit line of $3 billion on Tuesday. The operation is designed to support the real.