Brazil Stocks Rise as Itau Gains on Bets U.S. Rate Raise Delayed

Updated on
  • After weak economic data, odds of increase this month fall
  • Petrobras advances as BTG Pactual says buy on assets-sale plan

The Ibovespa rose for the first time in three days as weak factory data in the U.S. fueled speculation that an increase in interest rates in the world’s largest economy may not happen as soon as previously expected.

Ambev SA, the Brazilian unit of brewery Anheuser-Busch InBev NV, contributed the most to the benchmark equity index’s advance. State-controlled oil giant Petroleo Brasileiro SA also rose after Grupo BTG Pactual recommended buying the stock on prospects for the producer’s asset-sale plan. Pulp producers Suzano Papel & Celulose SA and Fibria SA rallied as a weaker real improved their export outlook.

After a 34 percent rally in the Ibovespa this year, investors are now reassessing the likelihood and timing of Brazil’s recovery from recession under the leadership of President Michel Temer, who vowed to change economic policies as he replaced Dilma Rousseff on Wednesday. In the meantime, Brazilian asset prices will track U.S. monetary policy, according to Jason Vieira, chief economist at Infinity Asset Management. Higher interest rates in the U.S. can make riskier assets such as Brazilian stocks relatively less attractive.

"Seeking clues on when the Federal Reserve will increase interest rates is crucial to determining a strategy to invest in Brazil," Vieira said from Sao Paulo.

An unexpected decline in manufacturing had traders trimming wagers the Federal Reserve will boost rates this month. The market now assigns a 32 percent chance that borrowing costs will rise in September, down from 40 percent earlier Thursday, according to fed fund futures data compiled by Bloomberg.

The Ibovespa rose 0.6 percent to 58,236.27 at the close of trading in Sao Paulo. Ambev climbed 2.5 percent. Petrobras, as Petroleo Brasileiro is known, rose 1.2 percent, while Suzano and Fibria advanced at least 4 percent.