June 10, 2010 / 2:41 PM / 9 years ago

Brazil stocks, real jump on China, Petrobras plan

(Updates with early trading on stock market)

SAO PAULO, June 10 (Reuters) - Brazilian stocks and the country’s currency jumped on Thursday, buoyed both by a legislative overhaul of the country’s oil industry and strong Chinese export data.

The benchmark Bovespa stock index .BVSP added 1.98 percent to 62,698.61 in late morning trade on Thursday, reversing losses of the previous session.

Reassurance about China’s economy boosted equities around the world on Thursday. China confirmed that exports jumped 50 percent in May, soothing investors jittery over the euro-zone debt crisis. [ID:nTOE65901X]

China, the world’s third-biggest economy, surpassed the United States last year to become Brazil’s biggest trading partner.

Leading gains on the Bovespa were shares of Vale VALE5.SA, the world’s largest producer of iron ore, which counts China as a major customer. Those shares surged 2.25 percent to 41.33 reais.

Steelmakers advanced, as well. Usiminas (USIM5.SA) moved up 2.03 percent to 43.76 reais. Gerdau (GGBR4.SA), the largest Latin American steelmaker, rose 3.23 percent to 24.26 reais and CSN (CSNA3.SA) put on 2.49 percent to 26.34 reais.

Shares of state-controlled energy giant Petrobras (PETR4.SA), the most heavily weighted stock in the index, rose 0.95 percent to 29.83 reais, hours after senators passed legislation meant to boost state control over massive deep water oil reserves. [ID:nN10176298]

Senators approved a plan to transfer up to 5 billion barrels of offshore reserves to Petrobras, paving the way for what might be the world’s largest share offering in 2010. The bill now goes for signature by President Luiz Inacio Lula da Silva.

“The key thing that we’re missing is how much each barrel that the government gives Petrobras will be valued at,” said Eduardo Suarez, an emerging market strategist at RBC Capital Markets in Toronto. “That will determine how much they raise in the share sale.”

Brazil’s currency, the real BRBY, firmed 1.6 percent to 1.819 per dollar, as the greenback sank against a basket of major currencies .DXY.

The Petrobras share sale could generate inflows into the billions of dollars, boosting Brazil’s currency. Last year, the real strengthened 34 percent against the dollar as investors poured money into higher-yielding Brazilian assets.

The currency also benefited from the central bank’s decision late on Wednesday to raise borrowing costs in Latin America’s largest economy.

In the first quarter, Brazil’s economy grew at its fastest clip since at least 1996, when the government adopted its current methodology.

But that growth has come with ever-higher consumer prices, prompting the government to move to contain inflation.

Brazilian policy-makers on Wednesday night raised the so-called Selic rate to 10.25 percent from 9.5 percent, following an increase at the previous meeting, in April, from 8.75 percent. [ID:nN09179023]

In contrast, the European Central Bank kept interest rates at a record low of 1.0 percent on Thursday. [ID:nWEA5693]

The higher Selic lifted yields on Brazilian interest rate futures contracts <0#DIJ:>.

The yield on the contract due January 2011 DIJF1 crept up to 11.07 percent from 11.03 percent. The yield on the contract due January 2012 DIJF2 ticked up to 11.97 percent from 11.93 percent.

Both contracts were among the most active of the early session. (Reporting by Luciana Lopez. Editing by W Simon )

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