Bovespa Rises on Brazil Inflation Report, Greek Debt Optimism

The Bovespa stock index rose, paring a second weekly drop, as reports showed that prices declined more than forecast in Brazil, and Germany retreated from demands that bondholders be forced to shoulder a share of a Greek rescue.

Homebuilder Gafisa SA led gains by companies that depend on domestic demand.

The Bovespa index rose 0.6 percent to 61,254.73 at 9:10 a.m. New York time. Fifty-three stocks gained on the index, while 13 fell. The gauge is down 2.3 percent this week. The real strengthened 0.3 percent to 1.5974 per U.S. dollar.

“The domestic demand side in Brazil is absolutely phenomenal,” said Stefan Hofer, a Zurich-based emerging-market equity strategist at Bank Julius Baer & Co., which oversees about $204 billion. “We need to get progress on Greece. We’re in for a bit of a rougher ride in June and July, but after the summer I think people will be reminded that there are some pretty strong pockets of growth out there.”

Germany’s Chancellor Angela Merkel said today she’ll work with the European Central Bank to avoid disrupting markets.

“We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin at a joint press conference with French President Nicolas Sarkozy.

The euro strengthened and Greek bonds rallied as Merkel and Sarkozy signaled a reconciliation between German calls for investors to help bail out Greece with warnings from the ECB and France that a compulsory move risked triggering the euro area’s first sovereign default.

Copper Advances

Copper rose in New York on speculation a Greek rescue will revive growth and demand for industrial metals.

In Brazil, the Rio de Janeiro-based Getulio Vargas Foundation’s IGP-10 inflation index, which measures consumer, construction and wholesale prices from the 11th of the previous month to the 10th of the current month, fell 0.22 percent in June, which compares with the median forecast of a 0.15 percent decline in a Bloomberg survey of 22 economists.

Sao Paulo’s FIPE weekly consumer prices report from the Foundation Economics Research Institute showed a decrease of 0.08 percent in the second week of June, lower than the previous reading of a 0.05 percent increase.

Gafisa climbed 2.2 percent to 7.86 reais.

Brazil’s benchmark equity gauge is approaching a so-called bear market after falling 17 percent from a November peak through yesterday amid concern quickening inflation will hurt economic growth.

The Bovespa index trades at 10 times analysts’ earnings estimates, the lowest since January 2009, according to weekly data compiled by Bloomberg. That compares to a ratio of 12.5 for the Shanghai Composite Index, 6.6 for Russia’s Micex and 14.8 for India’s Sensex.