Brazil Stocks in Longest Rally Since March on Political Outlook

(Bloomberg) -- The Ibovespa gained for a sixth consecutive session, heading for its longest rally since March, amid speculation that Brazil’s lower house will elect a speaker who supports Acting President Michel Temer’s proposals to cut Brazil’s budget deficit.

Itau Unibanco Holding SA and Banco Bradesco SA, Brazil’s largest banks, contributed the most to the gauge’s advance. State-controlled oil producer Petroleo Brasileiro SA, known as Petrobras, followed crude lower after data showed U.S. supplies rose.

With gains of 52 percent in dollar terms this year, Brazil’s Ibovespa is the top performer among the world’s major stock benchmarks on speculation that Temer, who temporarily replaced Dilma Rousseff as she faces an impeachment trial, will be able to shore up the country’s finances. While the government has announced measures to reduce the budget deficit, most are still waiting for approval by lawmakers. The lower house is scheduled to choose its new leader by the end of Wednesday, and there are 14 candidates for the job.

"It looks like most of the candidates in the running for the lower house will be more or less aligned with Temer,” Ignacio Crespo, an economist at Clear Corretora, said by phone from Sao Paulo. “There’s clearly a more favorable situation for Temer, compared to Dilma, when it comes to power to push measures through Congress."

The Ibovespa gained 0.6 percent to 54,598.29 in Sao Paulo. Itau rose 2.1 percent and Bradesco 2.2 percent. Petrobras fell 0.2 percent as crude in New York slumped 4 percent to $44.93 a barrel.

Brazil’s benchmark equity index is trading at 12.5 times estimated earnings, which is 11 percent above its five-year average. Latin America’s biggest economy is forecast to contract 3.3 percent this year after shrinking 3.8 percent in 2015, according to a weekly survey by the central bank.

--With assistance from Vinícius Andrade Fernando Travaglini and Denyse Godoy To contact the reporter on this story: Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Sebastian Boyd