Brazil stocks jump to 3-month high, real gains

Mon Jan 5, 2009 3:43pm EST
(Updates to close)
SAO PAULO, Jan 5 (Reuters) - Brazilian stocks rose to a three-month high on Monday as rising risk appetite buoyed shares of mining company Vale and local steelmakers CSN and Usiminas, while a jump in oil prices lifted energy giant Petrobras.
The Bovespa index .BVSP of the Sao Paulo stock exchange jumped 3.17 percent to 41,518.7 points, its highest close since ending at 41,569 on Oct. 14. The index has surged nearly 15 percent over five straight sessions.
Mining company Vale (VALE5.SA) surged 6.9 percent to 28 reais, adding to the massive 9.7 percent surge the previous session as investors snapped up liquid Brazilian stocks.
Shares of state-run energy giant Petrobras (PETR4.SA) gained 2.3 percent to 25.10 reais as crude oil prices climbed more than 4 percent in London and New York above $48 a barrel. The stock jumped more than 7 percent on Friday.
Yield spreads on the Brazilian government's overseas bonds over comparable U.S. Treasuries, as measured by JPMorgan's EMBI+ index, fell, reflecting a decline in investors' risk aversion toward Brazilian assets. The index 11EMJ showed the country's bond spread narrowed by 16 basis points to 389.
Spreads for emerging market bonds as a whole dropped 19 basis points to 646.
Stock markets in Asia rose to a two-month high on Monday, as investors decided to shift into riskier assets on hopes for a global economy recovery.
Steelmaker CSN (CSNA3.SA) surged 8.9 percent to 34.55 reais, buoyed by hopes of an economic recovery and demand for riskier assets. Usiminas (USIM5.SA) climbed 6.5 percent to 30.60 reais, while Gerdau (GGBR4.SA) gained 5.5 percent to 17 reais.
Brazil's national currency BRBY, the real, surged 3.4 percent to 2.256 reais per U.S. dollar and trading in the spot foreign exchange market was about a third of the normal volume.
Analysts said it is too early to say if the currency is set to get stronger against the greenback, despite its 23.8 percent plunge in 2008.
"With such a low trading volume, you can't really tell what this means in terms of inflows and outflows, if it really would have gained 3 percent in a normal trading day or if this happened because of a lack of participants (in the market)," said Jorge Knauer, head of currency trading at the Banco Prosper.
Brazil's central bank sold $650 million in dollar repurchase agreements in an auction, its latest effort to add liquidity in the foreign exchange market and meet a surge in demand for the U.S. currency.
The bank sold the repos at an exchange rate of 2.291 Brazilian reais per U.S. dollar.
Interest rate futures <0#dij:> fell sharply after a weekly central bank survey released on Monday showed economists now forecast a 50 basis-point cut in domestic borrowing costs at the first monetary policy meeting of the year, at the end of January. The survey previously showed analysts forecast rates would drop by 25 basis points.
The bank's monetary policy committee, know as Copom, voted unanimously to keep the benchmark Selic lending rate at a two-year high of 13.75 percent in December, even though the majority of its eight members considered a 25 basis-point cut.
(Reporting by Elzio Barreto and Jenifer Correa; Editing by Diane Craft)