Ibovespa Posts Longest Rally Since October on Economic Optimism

  • Lenders Itau, Bradesco among top contributors to gauge’s gain
  • State-controlled Petrobras rises as UBS says buy stock

The Ibovespa posted its longest winning streak since October after two surveys bolstered confidence in the recovery of Latin America’s largest economy.

Lenders Itau Unibanco Holding SA and Banco Bradesco SA were among the biggest contributors to the equity index’s gains after a study showed Brazilian optimism about the economy reached the highest level in 18 months. State-controlled oil producer Petroleo Brasileiro SA, known as Petrobras, climbed after UBS Group AG recommended buying the stock and called the troubled company a "Phoenix reborn."

Brazilian shares extended the biggest rally among major benchmarks this year on speculation that Acting President Michel Temer will be able to pull the nation out of its deepest recession in a century. Optimism with the economy has increased as Brazilians became more confident about a deceleration in inflation, lower unemployment risks and better purchasing power, according to a Datafolha poll published Saturday. A separate tally by the central bank showed analysts boosting their growth forecast for next year.

"The mood in the country is much more positive now," said Vitor Suzaki, an analyst at brokerage Lerosa Investimentos in Sao Paulo. "And confidence is the first necessary improvement for the economy to revive."

The Ibovespa added 1.6 percent to 56,484.21 at the close of trading in Sao Paulo, climbing for a ninth straight day. Itau and Bradesco rose at least 1.7 percent. Petrobras advanced 4.8 percent, defying a slump in crude prices. Steelmakers Usinas Siderurgicas de Minas Gerais SA and Metalurgica Gerdau SA followed gains in metals.

After shrinking 3.8 percent in 2015, Brazil’s gross domestic product is forecast by economists surveyed by the central bank to contract 3.25 percent this year before expanding 1.1 percent in 2017. In the previous weekly poll, analysts predicted growth of 1 percent for next year.

Temer replaced Dilma Rousseff as the leader of the country in May while she faces an impeachment trial for allegedly breaking budget laws. A final decision by the Senate is expected next month. The majority of Brazilians want Temer to remain as president, according to Datafolha.

"As political uncertainty eases, we believe that Brazil will finally emerge from a two-year recession," analysts at Morgan Stanley led by Arthur Carvalho wrote in a note to clients dated Monday. Growth should stabilize in the fourth quarter of 2016, accelerate in 2017, and increase more solidly in 2018, according to the report.

Before it's here, it's on the Bloomberg Terminal.