Brazil Stocks Rise as U.S. Consumer Confidence Boosts Outlook for Economy

Most Brazilian stocks rose, following yesterday’s drop, after higher-than-forecast U.S. consumer confidence boosted the outlook for economic growth in Brazil’s second-biggest trading partner.

Banco do Brasil SA (BBAS3), Latin America’s biggest bank by assets, climbed after being raised to “overweight” at JPMorgan Chase & Co. Klabin SA, Latin America’s biggest paper maker, advanced for a fourth day. MRV Engenharia & Participacoes SA led homebuilder gains.

The Bovespa stock index increased 0.3 percent to 67,155.40 at 10:31 a.m. New York time. Forty-nine stocks rose on the index while 17 dropped. The real strengthened 0.2 percent to 1.5655 per dollar. Brazilian stocks dropped yesterday after the central bank raised its benchmark interest rate.

“U.S. consumer confidence is one of the most important numbers,” said Rodrigo Mello, who helps manage 250 million reais ($159.5 million) as partner at Oren Investimentos in Rio de Janeiro. “There is pressure from interest rates, which has been the principal driver.”

The Bovespa erased a drop of as much as 0.4 percent after a report showed confidence among U.S. consumers increased more than forecast in April, signaling the improving labor market is helping Americans weather rising fuel costs.

The Conference Board’s confidence index rose to 65.4 from a revised 63.8 in March, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg was an advance to 64.5.

MRV Engenharia & Participacoes
Banco do Brasil gained 0.6 percent to 29.18 reais after being raised from “neutral” at JPMorgan. Klabin increased 1.1 percent to 6.40 reais. MRV, Brazil’s fourth-biggest homebuilder by revenue, advanced 1.7 percent to 13.93 reais as the BM&FBovespa Real Estate (IMOBBV) Index rose 0.9 percent.

The index’s advance was limited by declines in oil companies OGX Petroleo & Gas Participacoes SA and Petroleo Brasileiro SA. (PETR4) OGX, owned by billionaire Eike Batista, fell 0.9 percent to 17.50 reais. Petrobras, Brazil’s state-controlled oil producer, slipped 0.4 percent to 26.07 reais.

Brazil’s refusal to allow higher gasoline prices is cutting into returns of its sovereign wealth fund, whose main holdings are Petrobras shares.

Sovereign Fund Declines
The fund, set up in December 2008 with 14.3 billion reais in capital, lost 7.4 percent from the end of March through April 20, marking the biggest monthly decline since October, data from Brazil’s regulator show. Petrobras voting shares, which account for about 57 percent of the fund’s assets, fell 9.6 percent in the period, while preferred shares that make up 23 percent of total assets dropped 7.8 percent.

The Bovespa lost 3.4 percent this year through yesterday after declines in oil companies, homebuilders and banks outweighed a rally in telecom shares. The index trades at 10.7 times analysts’ earnings estimates, according to weekly data compiled by Bloomberg. That compares to a ratio of 13.8 for the Shanghai Composite Index, 7.5 for Russia’s Micex, and 15.5 for India’s Sensex.

Investors pulled 3.87 billion reais from Latin America’s biggest equity market this year through April 18, data from the Sao Paulo exchange show.