People look at an electronic board showing the graph of the recent fluctuations of market indices at the floor of Brazil's BM&F Bovespa Stock Market in downtown Sao Paulo, Brazil, May 9, 2016.PAULO WHITAKER/Reuters
Brazil's Ibovespa held at its highest level in four years as state-controlled oil giant Petroleo Brasileiro SA announced an exploration and production partnership with Paris-based Total SA as part of its turnaround plan.
On Friday, the Brazilian company known as Petrobras settled four lawsuits to reimburse U.S. investors for losses related to a corruption scandal, adding to the optimism over its rebound. The gains of the producer Monday outweighed a decline by lenders Banco Bradesco SA and Itau Unibanco Holding SA after economists reduced their growth forecast for the country's economy next year to its lowest level in two months while predicting a deeper contraction in 2016.
Petrobras shares have soared 171 per cent this year as stock buyers cheered its efforts to trim debt and sell assets after five years in which the company's market value shrunk by 279 billion reais ($119-billion). The oil producer was at the centre of a graft probe that shook the country's political and business elite, blindsided investors and contributed to the impeachment of President Dilma Rousseff earlier this year.
"The measures taken by Petrobras have been a great signal to markets," said Renato Nobile, chief executive officer at Bullmark Financial Group in Brasilia, which has 1.2 billion reais in assets under management.
Brazilian stocks have gained 88 per cent this year in dollar terms – the best performance in the world – on optimism that President Michel Temer, who permanently replaced Ms. Rousseff in August, will succeed in trimming a budget deficit and paving way to restore growth. Lawmakers are expected to pass on Tuesday, in the second round of the vote, a spending cap bill that's seen as crucial to shoring up finances.
Latin America's biggest economy will expand 1.23 per cent in 2017, according to a central bank survey of economists, down from their prediction of 1.3 per cent the week before. The analysts also lowered their 2016 GDP forecast to a 3.22 per cent contraction.