April 30, 2008 / 9:05 PM / 11 years ago

Brazil stocks jump 6 pct, real rallies on upgrade

(Updates to close)

By Todd Benson

SAO PAULO, April 30 (Reuters) - Brazil’s stock market surged more than 6 percent on Wednesday to an all-time high and the currency clocked its biggest one-day gain in seven months after Standard & Poor’s lifted the country’s credit rating to much-coveted investment grade status.

The Sao Paulo Stock Exchange's benchmark Bovespa index .BVSP rose 6.33 percent to 67,868.45 points, its largest gain since Oct. 17, 2002, when markets were bouncing back from a sell-off in the run-up to Luiz Inacio Lula da Silva's rise to the presidency.

The Brazilian real BRBYBRL= followed the Bovespa higher, rallying 2.53 percent to 1.663 per U.S. dollar, its biggest one-session gain since Aug. 17, 2007. The real has strengthened almost 7 percent this year.

Markets soared after S&P announced it had raised Brazil’s long-term foreign currency sovereign rating to “BBB-“ from “BB+”, becoming the first major ratings agency to give the country an investment-grade credit rating.

The upgrade is likely to usher in a fresh wave of investment into Latin America’s largest economy, propping up Brazil’s stocks, bonds and currency. Several pension funds and institutional investors are barred from putting money into non-investment grade securities.

“The fact that this happened at a time of crisis in the global economy is not going to be overlooked by foreign investors,” said Caio Megale, an economist at Maua Investimentos in Sao Paulo. “This will have an impact in terms of capital inflows. ... The stock market is going to be even more attractive.”

Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange in Sao Paulo fell sharply on the news, reflecting investor optimism about the outlook for the country’s financial markets.

Shares rose across the board, with blue chips Vale and Petrobras leading the way. Vale VALE5.SA, the world’s top producer and exporter of iron ore, surged 5.06 percent to 53.59 reais while Petrobras (PETR4.SA) — the top-weighted stock in the Bovespa index — jumped 3.18 percent to 42.20 reais.

After the market closed, Petrobras said it would raise gasoline prices by 10 percent and diesel prices by 15 percent as of May 2 to keep up with soaring crude oil prices. The increase, the first in two and a half years, will bring in much-needed revenue at a time when Petrobras is investing heavily to develop new oil finds. (Additional reporting by Aluiso Alves and Silvio Cascione; Editing by Leslie Adler)

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