Brazil’s Real, Stocks Rise as U.S. Rate Bets Bolster Commodities

Updated on
  • Riskier markets would be favored by delay in Fed rate increase
  • Iron-ore miner Vale leads gains among raw-materials producers

Brazil’s currency and stocks joined a rally in emerging markets as commodities advanced and a weaker-than-expected jobs report out of the U.S. boosted speculation the Federal Reserve may delay interest-rate increases.

Miner Vale SA had its first weekly advance in five weeks as iron ore advanced the most in a month. Steelmakers including Gerdau SA followed the gains, sending an index of raw-materials producers to the highest level in three weeks. The real strengthened 1.9 percent to 3.5273 per dollar and the benchmark Ibovespa climbed 1.5 percent to 50,619.50 on Friday after slower hiring in the U.S. led traders to reduce bets that Federal Reserve policy makers will increase interest rates at its June meeting.

"The possibility of a rate increase was making investors in emerging markets tense, so that’s a relief," said Vitor Suzaki, an analyst at brokerage Lerosa Investimentos. "It’s a positive day for Brazilian assets."

The boost in commodities prices offset concern that spending cuts in Brazil may be watered down, said Georgette Boele, an analyst at ABN Amro Group NV in Amsterdam. O Estado de S. Paulo newspaper said Friday the health and education budgets may be left out of austerity measures.

Brazilian assets are among the world’s best performers this year on speculation the new administration, which took over last month, would be able to curtail a growing budget deficit and help pull the country out of its worst recession in a century. To do that, Acting President Michel Temer needs to find support in Brazil’s fractured Congress for measures to reduce spending and raise revenue.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, dropped 0.12 percentage point to 12.54 percent. They are down 0.45 percentage point this week.