Ibovespa Climbs as Traders Wager on Interest-Rate Cut in Brazil

(Bloomberg) -- The Ibovespa capped its longest winning streak in two months as the gauge rose on speculation Brazil’s central bank may cut interest rates sooner than previously expected to bolster the economy.

University operator Kroton Educacional SA rallied with consumer stocks after inflation decelerated more than estimated in September and Finance Minister Henrique Meirelles said it’s "highly probable" borrowing costs will fall by year-end. Traders are betting they will begin to decline as soon as October. Commodity producers including oil giant Petroleo Brasileiro SA advanced, following gains in raw materials, as the Ibovespa rose for the fourth consecutive day.

Brazilian stocks have climbed 36 percent this year on optimism that the new government will succeed in putting in place a plan to shore up the nation’s finances and restore growth after the worst recession in a century. As President Michel Temer vows to push for the approval of unpopular reforms that include spending cuts, making it easier for companies to invest is also a key part of the strategy to fuel a rebound.

"The business environment is getting better, and so is the confidence of investors," Hersz Ferman, an analyst at the brokerage Elite Corretora, said from Rio de Janeiro. "That’s the first step for the economy to improve."

The Ibovespa climbed 1 percent to 58,994.17 at the close of trading in Sao Paulo, extending a four-day advance to 3.4 percent. It was the longest winning streak since July 19. Kroton added 2.4 percent and retailer Cia. Brasileira de Distribuicao rose 2.9 percent, among the the biggest gains on the benchmark gauge. Gafisa SA climbed 4.2 percent after Grupo BTG Pactual recommended buying the stock.

Swap rates on the contract maturing in January 2018, a gauge of expectations for Brazil’s interest rates, dropped 0.11 percentage point to 12.25 percent, the lowest since January. Inflation as measured by the IPCA-15 index slowed to 0.23 percent in the month through mid-September after a 0.45 percent increase one month earlier, according to the national statistics agency. That compares with the median estimate from 40 analysts surveyed by Bloomberg for a 0.33 percent increase in consumer prices.

Thirty-six of the Ibovespa’s 58 stocks climbed Thursday, joining a global rally after the Bank of Japan and the Federal Reserve decided to leave their interest rates unchanged. With low returns in developed nations, massive cash inflows have fueled gains for emerging nations assets in the past months.

Petrobras, as Petroleo Brasileiro is known, rose 2.5 percent. The Bloomberg Commodity Index advanced 0.7 percent to the highest level since Aug. 23.

--With assistance from Anna Edgerton Patricia Lara Josue Leonel Ricardo Strulovici Wolfrid 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