Brazil stocks, real close at 2009 highs

Mon Aug 3, 2009 5:08pm EDT
(Updates to close)
SAO PAULO, Aug 3 (Reuters) - Brazil's currency and benchmark stock index both closed on Monday at their strongest levels in almost a year as improved bank earnings in Europe and strong Chinese demand for commodities fueled hopes of a global economic rebound.
The benchmark Bovespa index .BVSP closed up 2.25 percent to 55,997.81, the highest close since Aug. 28, 2008.
Brazil's currency, the real BRBY, ended the day 1.71 percent stronger at 1.834 reais to the dollar, its best since Sept. 25.
"Flows have sent the real higher for a while, but it is the news about the improving global scenario that lifted markets," said Carlos Gandolfo, a partner with Pioneer Corretora de Cambio, one of the largest currency trading houses in Brazil.
Last week, emerging market bond and equity funds had their best and second-best weeks, respectively, in terms of client flows since last August, according to Commerzbank.
Investors committed almost $3 billion in total to equity funds in Asia and Latin America in the period versus $2.5 billion in the preceding week.
One trader, who declined to be identified because he is not authorized by his firm to speak publicly, said part of the gain in the real on Monday was due to the repatriation of some of the $1 billion that state-run power utility Eletrobras (ELET6.SA) raised in a global bond sale last month.
Global equities rose in the wake of encouraging second-quarter results by some big European banks.
Barclays Plc (BARC.L)(BCS.N) reported an 8 percent rise in half-year profit. HSBC Holdings PLC (HSBA.L)(HBC.N) said its first-half profit fell by one-half from a year ago, but the results were better than analysts expected.
"Positive surprises in activity indicators are popping up here and there," said Dalton Gardimam, chief economist for Bradesco Corretora.
Pioneer's Gandolfo said foreign investors' appetite for Brazilian stocks and fixed income will probably push the real as high as 1.8 per dollar by the end of the month. Francisco Carvalho, head of currency trading at Liquidez Corretora, the largest foreign exchange trader in Brazil, expects the currency to trade around the same level.
In stocks, state-controlled energy giant Petrobras (PETR4.SA) rose 3.4 percent to 32.55 reais as oil CLc1 rallied 3 percent on Monday and mining company Vale (VALE5.SA) advanced 2 percent to 33.05 reais. The two stocks have the heaviest weightings in the index.
Benign inflation may pull yields on interest rates futures <0#dij:> down this week, traders said. The yield on the contract due in January 2011 DIJF1 inched up to 9.85 percent from 9.84 percent.
The yield reflects expectations for the level of the benchmark interest rate, the Selic, by the end of 2010. (Reporting by Guillermo Parra-Bernal and Luciana Lopez; Editing by Leslie Adler)