Brazil stocks climb on Petrobras, Vale, real firms

Published: 18 Jan 2010 17:06:28 PST

SAO PAULO, Jan 18 - Brazilian stocks closed higher on Monday as heavyweights Petrobras and Vale advanced, while the currency firmed slightly.

The benchmark Bovespa stock index added 0.61 percent to 69,400.93 after having dropped a cumulative 2 percent over the two previous sessions.

Brazil's currency, the real, firmed 0.28 percent to 1.768 per U.S. dollar in thin trading due to the Martin Luther King, Jr. Day holiday markets closure in the United States.

The real weakened all last week, losing 2.4 percent against the dollar on increased bets the government would intervene more in currency markets through Brazil's sovereign wealth fund.

"Doubts over the actions of the sovereign wealth fund in the foreign exchange market and the daily dollar purchases should put pressure on the real," said Miriam Tavares, currency director at brokerage AGK.

Leading gains in the Bovespa were the two most heavily-weighted stocks, Petrobras and Vale.

State-controlled energy giant Petrobras put on 2.24 percent to 36.55 reais. The company plans to sell 2 million barrels of crude oil to clients in Asia every two months, using storage tanks it owns on Japan's Okinawa island, trade sources said.

Vale, the world's largest producer of iron ore, gained 1.21 percent to 46.70 reais.

Itau Unibanco and Bradesco, Brazil's two largest private-sector banks, rose on expectations that central bank data due this week will show a decline in default rates and an increase in bank lending in December. Itau Unibanco climbed 0.89 percent to 37.60 reais, while Bradesco advanced 0.89 percent to 36.40 reais.

Also posting strong gains, pulp and paper company Fibria jumped 2.82 percent to 36.50 reais per share as investors snapped up the stock after it plunged 10.5 percent over four days.

Fibria has strong exposure to the pulp cycle, "the potential paper assets divestiture could lead to faster deleveraging" and "Fibria is trading in line ... with its global pulp peers," noted a report from Itau Securities dated Monday maintaining the company at outperform.

Shares of Brasil Telecom SA, the operating unit of the country's largest phone group Oi, dropped 2.62 percent to 14.50 reais, adding to an 11 percent plunge the previous session. Parent Oi said last week it would halt the purchase of Brasil Telecom stock from minority shareholders because of larger-than-expected losses from lawsuits at the unit. Oi shares slid 1.77 percent to 34.43 reais.

Changes in yields on Brazilian interest rate futures contracts were mixed, with shorter-term contracts largely ticking higher and longer-term contracts broadly edging lower.

A weekly central bank survey showed economists expect inflation to stay in the center of the government's target in 2010 and 2011 even as forecasts for economic growth ticked higher.

The yield on the contract due January 2011 edged to 10.27 percent from 10.267 percent on Friday. The yield on the contract due January 2012 dipped to 11.68 percent from 11.7 percent.