Ibovespa Climbs as Government Moves to Limit Spending Increases

(Bloomberg) -- The Ibovespa rose from its lowest level in almost two weeks after the government signaled stepped up efforts to trim a budget deficit, fueling optimism that lawmakers will support measures aimed at restoring the country’s finances.

State-controlled lender Banco do Brasil SA led gains among financial companies after UBS Group AG forecast a faster recovery for Latin America’s largest economy. Oil giant Petroleo Brasileiro SA and miner Vale SA contributed the most to the benchmark equity index’s advance as commodities rose. Steelmakers Metalurgica Gerdau SA and Usinas Siderurgicas de Minas Gerais SA, known as Usiminas, were also among the biggest gainers on the gauge.

Brazil’s stocks are posting the world’s best performance this year on speculation that a new government will bolster the country’s finances and reverse the deterioration that led to the loss of its investment-grade credit rating last year. A government official said that salary increases for public servants will be halted as politicians debate other spending measures, according to reports in newspapers O Estado de S. Paulo and O Globo.

"It’s very good for the markets that the government sends those positive, firm signals," said Paulo Henrique Amantea, an analyst at the brokerage Guide Investimentos in Belo Horizonte. "After yesterday’s drop, traders are taking the opportunity to buy more."

The Ibovespa climbed 0.4 percent to 58,020.04 at the close of trading in Sao Paulo as 34 of its 59 stocks gained. Banco do Brasil added 1.2 percent. Petrobras, as Petroleo Brasileiro is known, gained 2.6 percent as oil reversed an earlier decline on speculation Iran may be more willing to cooperate with other producers seeking to freeze output. Vale rose 1.5 percent, Metalurgica Gerdau advanced 2.1 percent, and Usiminas rose 3.3 percent. Raw-materials producers account for 23 percent of the Ibovespa’s weighting.

Retailer Lojas Americanas SA gained the most among companies that rely on domestic demand as UBS estimated Brazil’s gross domestic product will contract 2.8 percent this year, less than the 3.5 percent of its prior forecast, and grow 1.6 percent in 2017, double its previous rate.