Brazil’s Stocks Rise as Petrobras Gain Offsets Recovery Concern

  • State-controlled oil producer follows advance in crude prices
  • Ibovespa fell earlier as spending bill flop damped optimism

The Ibovespa rose for the first time this week as Petroleo Brasileiro SA followed crude-oil prices higher, drowning out concern that Brazil’s government will struggle get the support it needs to pass measures aimed at shoring up the budget and reigniting growth.

Petrobras, as the state-owned oil producer is known, was among the biggest contributors to the index’s advance as it accounts for about 9 percent of the benchmark’s weighting. Oil rose Wednesday as industry data showed that stockpile declines in the U.S. are paring excess supply.

An increase in prices improves the outlook for the battered Brazilian giant, which is selling assets and backpedaling on investment plans after oil prices plunged in the past two years. Petrobras lost 230 billion reais ($70.5 billion) in the 5 1/2 years of Dilma Rousseff’s presidency, during which time a corruption scandal entangled former executives, politicians and builders. The company’s stock has rebounded 9 percent since she was suspended in May as part of an impeachment process.

"There has been a lot of good news for Petrobras lately," Raphael Figueredo, an analyst at the brokerage Clear Corretora, said from Sao Paulo.

The Ibovespa gained 1.6 percent to 57,076.91 at the close of trading in Sao Paulo as 42 of its 59 stocks gained. Petrobras climbed 4.8 percent, the most in two weeks.

The index had fallen as much as 0.7 percent earlier Wednesday as a congressional vote on state spending was delayed. After failing to achieve a quorum, the lower house postponed the vote on a bill that would have imposed spending restrictions on states in exchange for federal help with their debt.

The failure sends a negative message that Temer’s government may lack the political strength to impose tough measures, according to Adeodato Volpi Netto, the head of capital markets at Eleven Financial Research.

"It’s a mess in Congress, to say the least," he said from Sao Paulo. "The people who are expected to support a reform of the country’s finances are the ones who have pushed Brazil to the situation it is in now."

Brazilian stocks have rallied 30 percent this year on optimism that a more investor-friendly administration would restore confidence in the country’s economic management.

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