By Alexander Ragir
Jan. 22 (Bloomberg) --Brazil’s Bovespa stock-index futures gained, indicating the gauge may rise for a second day, after the country’s central bank cut interest rates more than forecast and signaled it’s ready to reduce borrowing costs further.
Banco Itau Holding Financeira SA and Cia. Brasileira de Distribuicao Grupo Pao de Acucar led a rally in banks and retailers in Germany after policy makers slashed interest rates by the most in five years. Cia. Siderurgica Nacional SA, Brazil’s third-biggest steelmaker that supplies the auto industry, jumped 8.1 percent in Germany.
The 1 percentage-point cut was “definitely a surprise,” said Urban Larson, a Latin America portfolio manager at F&C Management Ltd. in London, which oversees about $2 billion in emerging-market stocks. “Rate cuts are generally positive for domestic stocks because it reduces the cost of credit.”
Bovespa futures advanced 0.8 percent to 39,100 at 7:04 a.m. New York time.
Itau, which is buying Uniao de Bancos Brasileiros SA to become Brazil’s biggest bank, gained 4 percent to 7.74 euros. Pao de Acucar, Brazil’s biggest publicly traded retailer, gained 2.5 percent to 18.96 euros.
Policy makers led by bank President Henrique Meirelles voted 5-3 to lower the overnight rate to 12.75 percent from a two-year high of 13.75 percent, surprising 41 of 49 economists who had predicted a smaller cut. The bank said it was “carrying out immediately a significant part” of a new easing cycle without “putting at risk the fulfillment of” its inflation target.
CSN surged 89 cents to 11.91 euros.
Stocks may rally today as investors react positively to the swift action by the normally conservative monetary committee, said Tony Volpon, chief strategist at CM Capital brokerage in Sao Paulo.
“The central bank is trying to help economic activity,” Volpon said in an interview with Bloomberg Television. “While on the other hand, it shows that the economy is facing serious problems.”
To contact the reporter on this story: Alexander Ragir in Rio de Janeiro ataragir@bloomberg.net
Last Updated: January 22, 2009 07:23 EST