Brazil’s Stocks, Real Gain as Temer Victory Fuels Recovery Bets

  • New lower house speaker expected to support government agenda
  • Advance in commodities also boosts Ibovespa and currency

The Ibovespa advanced to its highest level in 14 months and the real climbed for a third day after an ally of Acting President Michel Temer became the new lower house speaker, signaling Brazil’s interim government has a better chance of winning lawmakers’ support for a plan to pull the country out of recession.

The currency gained 0.4 percent to 3.2526 per dollar and the benchmark equity index rose 1.6 percent to 55,480.87 on Thursday as 42 of its 59 stocks advanced. Lender Banco Bradesco SA contributed the most to the gains after Credit Suisse Group AG recommended buying the stock. BM&FBovespa SA, the operator of the exchange, advanced to its highest price on record.

Brazilian assets are the world’s best performers this year on optimism that the replacement of Dilma Rousseff’s team by a more market-friendly administration will win back investors’ confidence after Latin America’s biggest economy was cut to junk. While many measures to shore up the budget and revive activity have been announced, the vital approval by lawmakers is still pending, so the appointment of the economist Rodrigo Maia as the head of the lower house is encouraging investors to make more bets on the nation’s rebound.

"That’s really a very important victory for Temer’s agenda," Alvaro Bandeira, the chief economist at the brokerage Modalmais, said from Rio de Janeiro. "The trend for Brazil’s market is up now."

An increase in commodity prices from crude to metals Thursday also improved the prospects for the country’s producers, lifting the shares of state-controlled oil company Petroleo Brasileiro SA. A Bloomberg index of raw materials rose 0.2 percent, while a gauge of emerging-market currencies advanced 0.6 percent, on speculation that policy makers in major economies will work to stimulate growth.

"Maia’s victory was yet another government victory, especially regarding the approval of relevant measures for the fiscal adjustment," said Cleber Alessie, a currency trader at H.Commcor DTVM in Sao Paulo. "The real also gains with the enormous stimulus expectations worldwide."

The central bank intervened to stem the real’s advance amid concerns that a currency that’s too strong could hamper the country’s economic recovery by making its exports too expensive in dollar terms. The monetary authority is sold 10,000 reverse currency swaps, equivalent to buying $500 million in the futures market.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest rates, dropped 0.01 percentage point to 12.67 percent.

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