Photographer: Dado Galdieri/Bloomberg

Petrobras’s Advance Means Ibovespa Dodged Emerging-Market Slump

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  • Scenario for crude producer is very positive, according to UBS
  • Investors worldwide are monitoring odds of stimulus cutback

A rally in state-controlled oil producer Petroleo Brasileiro SA pushed the Ibovespa higher, allowing Brazil’s benchmark to avoid a rout that sent emerging-market stocks to their biggest drop in two months.

Petrobras, as Petroleo Brasileiro is known, rose after UBS Group AG said that the company’s prospects have improved with a more stable outlook for oil prices and a new management team. Dragging on the index, consumer stocks led by food company BRF SA declined as speculation that central banks in developed countries may curtail the cheap money that has been supporting riskier assets sank equity benchmarks in Asia and Europe.

The oil company is seen as a bellwether for Brazil’s economy and stock market, and the shares have more than doubled this year as investors wagered the country was poised for a rebound under new President Michel Temer. Analysts at UBS wrote in a note that the buy call on Brazil’s biggest state-owned company, which accounts for 10 percent of the benchmark equity index, is based on plans to sell assets and cut investment. Petrobras lost 190 billion reais ($58.5 billion) in market value in the five years through December.

"Petrobras has suffered so much over the past years, but it seems that the turnaround plan from the new management is working,” said Vitor Suzaki, an analyst at brokerage Lerosa Investimentos in Sao Paulo. “That’s the main news today, because investors are very cautious because of the global scenario."

The Ibovespa added 1 percent to 58,586.11 at the close of trading in Sao Paulo after falling as much as 0.8 percent. Petrobras rose 3.3 percent, contributing the most to the gauge’s advance. BRF fell 1.5 percent. The MSCI Emerging Markets Index retreated 2.2 percent.