Bovespa Rebounds on Slowing Inflation, Prospect of Bank Merger

By Alexander Ragir

Jan. 15 (Bloomberg) -- Brazil’s Bovespa index rebounded from its lowest level this year after wholesale inflation fell more than economists estimated and banks rallied on a report Banco Bradesco SA is in talks to buy a smaller rival.

Rossi Residencial SA rose the most on the Bovespa index as slowing inflation may spur the central bank to make deeper interest-rate cuts to boost the economy. Lojas Renner SA led a rally in retailers. Bradesco and Banco Itau Holding Financeira SA surged more than 2 percent on speculation of more acquisitions within the industry after Brazilian news agency Broadcast said Bradesco is in talks to buy Banco Industrial e Comercial SA.

The Bovespa gained 1.1 percent to 38,382.57 at 9:06 a.m. New York time. Chile’s Ipsa rose 0.2 percent. The MSCI Emerging Markets index dropped 2.9 percent.

Rossi, Brazil’s third-biggest homebuilder, gained 4.9 percent to 4.30 reais.

Lojas Renner rose 1.1 percent to 15.16 reais.

Consumer, construction and wholesale prices, as measured by the IGP-10 price index, fell 0.85 percent the past month through Jan. 10, the Rio de Janeiro-based Getulio Vargas Foundation said today. The media forecast of 25 economists surveyed by Bloomberg News was for a 0.40 percent decline.

Bradesco gained 2.2 percent to 21.48 reais. Bic Banco jumped 15 percent to 4.58 reais. Bradesco and BicBanco have been in acquisition talks for a few months and the deal is pending agreement on the price, Brazilian news agency Broadcast reported, citing a person close to Bradesco that it didn’t name.

Itau, which is buying Uniao de Bancos Brasileiros SA to become Brazil’s biggest bank, gained 2.6 percent to 25 reais. Unibanco advanced 3.1 percent to 14 reais. Bradesco said in an e- mailed statement that it will not comment on market speculation.

The BM&FBovespa MidLarge Cap index rose 1.2 percent, while the BM&FBovespa Small Cap index advanced 0.9 percent.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net