Ibovespa Gains as Rousseff's Remarks Outweigh Economic Outlook

  • President says Finance Minister Joaquim Levy will stay
  • Economists forecast Brazil will post deeper recession

Brazil’s stocks extended a three-day advance as President Dilma Rousseff’s reassurance that Finance Minister Joaquim Levy will stay in his post overshadowed forecasts for a deeper recession in Latin America’s largest economy.

The Ibovespa gained as Rousseff said the government agrees with Levy’s policies. Her comments outweighed a central bank survey that showed economists predict gross domestic product will contract 3 percent this year and 1.22 percent in 2016.

Brazil is heading toward its longest recession since the 1930s as the government struggles to shore up the budget to avoid more rating downgrades amid a widening corruption scandal. Rousseff has been criticized for the austerity measures proposed by Levy, even by members of her party, who say that cutting spending and raising taxes will deepen the country’s economic contraction.

“While Rousseff’s support for Levy has brought some relief, prospects for the economy are still very discouraging,” Ignacio Crespo, an economist at brokerage Guide Investimentos, said from Sao Paulo. "Brazil is stuck in the middle of this political crisis and we don’t see any signs of improvement."

The Ibovespa rose 0.5 percent to 47,447.31 at the close of trading in Sao Paulo, led by lenders Itau Unibanco Holding SA and Banco do Brasil SA. State-controlled oil producer Petroleo Brasileiro SA fell as a drop in crude dimmed the outlook for its offshore investments. The gauge is trading at 10.9 times estimated earnings, or in line with its five-year average, according to valuation data compiled by Bloomberg.

Financial shares in the MSCI Brazil Index rebounded from a five-day slide. Itau, Latin America’s biggest bank by market value, rallied 2.4 percent.

Traders had pushed down the value of Brazilian equities earlier Monday after the central bank survey with about 100 economists also showed they boosted their forecasts for interest rates next year to 12.75 percent from 12.63 percent.

Companies that rely on domestic demand tumbled, with food company JBS SA leading losses among consumer stocks. Vale SA, the world’s largest iron-ore producer, sank after Chinese data showing the weakest quarterly expansion since 2009. The Asian country is Brazil’s top trading partner.

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