Ibovespa Holds Near Four-Year High as Petrobras Inks Partnership

(Bloomberg) -- The Ibovespa held near its highest level in four years as state-controlled oil giant Petroleo Brasileiro SA announced an exploration and production partnership with Paris-based Total SA as part of its turnaround plan.

On Friday, the Brazilian company known as Petrobras settled four lawsuits to reimburse U.S. investors for losses related to a corruption scandal, adding to the optimism over its rebound. The gains of the producer Monday outweighed a decline by lenders Banco Bradesco SA and Itau Unibanco Holding SA after economists reduced their growth forecast for the country’s economy next year to its lowest level in two months while predicting a deeper contraction in 2016.

Petrobras shares have soared 172 percent this year as stock buyers cheered its efforts to trim debt and sell assets after five years in which the company’s market value shrunk by 279 billion reais ($89.4 billion). The oil producer was at the center of a graft probe that shook the country’s political and business elite, blindsided investors and contributed to the impeachment of President Dilma Rousseff earlier this year.

"The measures taken by Petrobras have been a great signal to markets," said Renato Nobile, chief executive officer at Bullmark Financial Group in Brasilia, which has 1.2 billion reais in assets under management.

The Ibovespa fell less than 0.1 percent to 64,059.89 at the close of trading in Sao Paulo after earlier rising as much as 0.9 percent. Petrobras added 1.4 percent. State-owned Centrais Eletrobras Brasileiras SA, known as Eletrobras, gained 1.7 percent after newspaper Folha de S.Paulo reported, citing an interview with the power utility’s Chief Executive Officer, that the government plans to inject 1 billion reais into the company.

Miner Vale SA climbed 2.8 percent as iron ore rose to the highest price in seven weeks. The country’s biggest steelmakers, including Metalurgica Gerdau SA, followed a global rally in the industry and were the best performers on the Brazilian equity index.

Brazilian stocks have gained 87 percent this year in dollar terms, the best performance in the world, on optimism that President Michel Temer, who permanently replaced Rousseff in August, will succeed in trimming a budget deficit and paving way to restore growth. Lawmakers are expected to pass on Tuesday, in the second round of the vote, a spending cap bill that’s seen as crucial to shoring up finances.

Latin America’s biggest economy will expand 1.23 percent in 2017, according to a central bank survey of economists, down from their prediction of 1.3 percent the week before. The analysts also lowered their forecast for 2016 GDP to a 3.22 percent contraction.

Bradesco lost 1 percent and Itau fell 0.9 percent. Car rental company Localiza Rent a Car SA dropped 4.4 percent, the worst performance on the Ibovespa.

--With assistance from Josue Leonel and Ney Hayashi To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Sebastian Boyd, Jessica Brice