Brazilian Stocks Advance for Fourth Month as Petrobras Rises

  • The state-run oil producer accounts for 10% of index weighting
  • Possible changes to spending-limit bill fuels investor anxiety

Brazil’s Ibovespa posted for its fourth straight monthly advance as state-controlled oil producer Petroleo Brasileiro SA followed crude oil higher. The real fell.

Petrobras, which accounts for 10 percent of the Ibovespa’s weighting, was the top contributor for the equity index’s advance on Friday as West Texas Intermediate crude oil reversed earlier losses to climb 41 cents and settle at $48.24 a barrel. Loyalty program operator Smiles SA led gains, climbing 4 percent, after it was rated outperform at Votorantim CTVM Research.

Brazil’s stocks and currency have surged this year amid optimism that president Michel Temer can trim a budget deficit and restore confidence in an ailing economy. His economic team is still working on a pension reform that, coupled with a constitutional amendment to cap government spending in inflation-adjusted terms, will be the cornerstone of Temer’s efforts to bring public debt back to a sustainable path.

"There is some general chasing of profits after sizable losses," said Ari Santos, an equity manager at brokerage H.Commcor. "It’s also the end of the month and the quarter, which could cause investors to try to push up the price of stocks to make their portfolios look better, so we should brace for volatility."

The Ibovespa was little changed at 58,367.05 at the close of trading in Sao Paulo as 31 of its 58 stocks advanced. The gauge gained 0.8 percent in September. The real weakened 0.1 percent to 3.2624 per dollar after earlier rising as much as 0.9 percent.

Earlier, the Ibovespa had swung between gains and losses after Folha de S. Paulo newspaper reported that a change in a proposed bill limiting government spending could allow for higher outlays next year. That would be a blow for investors who’d built up their expectations of what Temer could accomplish and turned Brazil’s stock market into the world’s best performer this year in the process.

"There is a lot of back and forth on the fiscal adjustment,” Santos said. “That is increasing investors’ anxiety.”

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