Brazil Bovespa Passes 60,000 Mark, Led by Metals: Latin Stocks

Sept. 27 (Bloomberg) -- Brazilian stocks gained, pushing the benchmark index above 60,000 for the first time, led by materials companies, on expectation further U.S. interest rate cuts will drive up commodity prices.

Steelmakers Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional and iron miner Cia. Vale do Rio Doce rose to records, leading the Bovespa Index as it gained 1,337.61, or 2.2 percent, to 61,052.44. The Morgan Stanley Capital International index of Latin American shares rose to a record, surpassing its July 19 peak. Mexico's Bolsa gained 0.7 percent, led by cement producer Cemex SAB.

``This is definitely a basic materials story, and emerging markets like Brazil have lots of basic materials in their indexes,'' said Alfredo Rotemberg, portfolio manager at Boyd Watterson Asset Management in Cleveland.

The Federal Reserve's half-percentage point cut in its main interest rate to 4.75 percent on Sept. 18 will spur economic growth and may also accelerate inflation, both of which create investor demand for materials, Rotemberg said. Weaker-than-expected new home sales reported in the U.S. increased speculation that the Fed will cut rates again at its next meeting, said Januario Hostin Jr., fund manager at Leme Investimentos in Florianopolis, Brazil.

``We're seeing that when these bad numbers come out, the market goes up,'' Hostin said in a phone interview. ``The market is working with future cuts, and that's elevated investment in stocks.''

Metals Rally

Usiminas, as the country's second largest steelmaker is known, jumped 2.9 percent to 130.40 reais, while CSN, the third largest, rose 4.4 percent to 131.49 reais. The Bloomberg World Iron/Steel Index of 67 companies gained 1.1 percent to a record.

Vale, the world's biggest iron ore producer, gained 4.3 percent to 53 reais, while Cemex gained 3.4 percent to 31.99 pesos, its first gain in seven days.

The Commodities Research Board index of 19 raw materials gained 1.4 percent today to the highest level in more than a year, paced by petroleum products and metals. Separately, analysts surveyed by Bloomberg estimated that iron-ore prices may jump by 30 percent next year, driven by demand from Chinese steelmakers.

Falling interest rates in the U.S. also make investments in higher-yielding Brazilian equities more attractive, said Amaury Fonseca Jr., partner at Vision Brazil Investments.

``Brazil, because it's a more liquid market, benefits when the appetite for risk returns,'' Fonseca said in an interview in Sao Paulo.

The Bovespa index, which fell last month as losses from U.S. subprime loans led investors to sell assets in Brazil, has jumped 27 percent since hitting a four month-low Aug. 16.

The index has gained 37 percent this year, led by Vale and state-controlled oil company Petroleo Brasileiro SA.

Nickel Prices

Vale, the world's second-biggest nickel producer, has jumped 85 percent this year, boosted by higher nickel prices and iron-ore demand. Petrobras has gained 19 percent this year as oil climbed to records, trading above $80 a barrel during the past two weeks. Petrobras gained 50 centavos, or 0.8 percent, to a record 60.35 reais.

The Mexican Bolsa rose 224.82, or 0.7 percent, led by Cemex and mobile-phone company America Movil SAB, which advanced for a second day after Brazilian regulators said the company gained market share there in August. Copper miner Grupo Mexico SAB gained 1.4 percent to 79.67 pesos as copper prices rose in New York.

Corp. Geo SAB, Mexico's largest homebuilder by sales, fell for the second day after the company said sales wouldn't meet estimates because of heavy rain in the country. Competitor Desarrolladora Homex SA recovered more than a third of yesterday's 5.3 percent decline and traded at 101.09 pesos. Company executives said Homex would meet its earlier forecast, Cecilia del Castillo, an analyst at Citigroup Inc.'s Accival unit in Mexico, told clients in a note today.

In other Latin American markets, the main indexes in Argentina, Chile, Colombia, Peru and Venezuela all gained. The MSCI Latin American index added 2.3 percent to 4,177.81.