Brazil Stocks Reverse Early Declines To Surge; Materials Gain

Brazil’s Bovespa stocks index reversed early declines to rally higher Monday as enthusiasm over purchasing trends abroad helped lift local share prices, especially in commodities-related sectors.

The main Sao Paulo stocks index ended 1.2% higher at 66,557 points after ending at 65,755 points Friday. Volume was moderate, with 5.5 billion Brazilian reais ($3.3 billion) in shares changing hands.

The index declined slightly in the early portion of the session as concerns over economic data in the euro zone cast some doubts on the potential strength of a recent recovery.

European industrial production declined 0.1% from November, despite forecasts for a stable result. Additionally, Portugal posted a 0.3% 4th-quarter decline in gross domestic product growth, adding to concerns.

Locally, investors were attentive to inflation and interest rate expectations, both of which rose, according to a central bank market survey published Monday.

The survey showed year-end forecasts for Brazil’s IPCA consumer price index, a key measure of inflation, rose to 5.75% from 5.66% the previous week. At the same time, the market’s year-end 2012 projection for Brazil’s reference Selic interest rate rose to 11.25% from 11.00% earlier.

The forecasts raised concerns Brazil’s central bank may have to adopt a harder line against local inflation than previously imagined.

But despite those trends, key sectors in Brazil saw some lift Monday from robust import data in China and its impact on the commodities.

China on Monday reported a 27% increase in oil imports in January and a 48% increase in imports of iron ore. Brazil is a major supplier of iron ore to China and other Asian markets.

Brazil’s exports, meanwhile, also gave reason for encouragement, helping the country post a $980 million surplus in early February according to trade data released Monday.

Those developments, combined with a continued correction from a steep local selloff midway through last week, helped push local share prices higher throughout latter part of the session.

At the end of trading Monday, materials and construction shares were among leaders.

Steelmaker Gerdau (GGB, GGBR4.BR) was up 0.7% to BRL23.07, mining giant Vale (VALE5.BR) rose 1.9% to BRL50.59, and construction sector player Gafisa (GFSA3.BR) rose 2.9% to BRL10.55.

In the banking sector, leading retail bank Itau-Unibanco Holding SA (ITUB4.BR) was up 0.8% to BRL36.38 and rival Banco Bradesco SA (BBDC4.BR) rose 0.5% to BRL30.98.

Elsewhere, telecom sector leader Oi (TNLP4.BR) rose 0.1% to BRL26.15, leading airline TAM SA (TAMM4.BR) was up 1.1% to BRL36.72 and state-controlled oil company Petrobras (PBR, PETR4.BR) was up 1.3% to BRL26.75.

All price quotes refer to companies’ preferred shares.