Brazil's Bovespa stock index gained for a fourth day, led by homebuilders and retailers, after the central bank signaled it may stop raising interest rates soon after unexpectedly slowing the pace of increases.

Rossi Residencial SA and Lojas Americanas SA climbed more than 2 percent. Vale SA, the world's largest iron-ore producer, advanced as metals prices climbed. Natura Cosmeticos SA, Brazil's largest cosmetics maker, rallied after saying second- quarter profit beat analysts' estimates.

The Bovespa index increased 1.5 percent to 65,427.23 at
9:26 a.m. New York time, the highest level since May 10. All 65 companies on the index advanced. The real strengthened 0.4 percent to 1.7730 per dollar.

"A smaller tightening cycle is clearly a positive environment," said Roni Lacerda, who helps manage 2.4 billion reais ($1.3 billion) at Mercatto Gestao de Recursos in Rio de Janeiro. "This will benefit retailers, homebuilders and logistics companies, and any others that are affected by the domestic economy. You don't have that environment that penalizes companies with more leverage and those in credit-sensitive sectors."

The bank's board, led by Henrique Meirelles, increased the benchmark Selic rate half a point to 10.75 percent yesterday. The move, which was anticipated by traders in the interest-rate futures market, surprised 48 of 51 analysts surveyed by Bloomberg. They predicted another 0.75-percentage-point increase, the same as at the bank's two previous meetings.

Eoin Treacy's view The Bovespa Index lost momentum from January following an impressive rally over the previous year. It unwound its overbought condition relative to the 200-day MA and has been ranging mostly below 70,000 for much of this year. It pulled back below the MA in May but found support in the region of the psychological 60,000 and would need to sustain a move below the low near 57,500 to question current scope for a continued rally towards the upper side of the medium term range.

The Chilean market tested the psychological 20,000 level for the first time today. It paused near 18,000 and 19,000 and has become somewhat overextended relative to the 200-day MA, so it is reasonable to expect the market to enter another period of consolidation in the region of the current level.

The Colombian Index also continues to extend its impressive advance and hit another new high today. However, it is also becoming somewhat overextended relative to its MA and a consolidation of recent gains looks increasingly likely. That minor concern aside, a sustained move back below 12,000 would be required to begin to question the consistency of the medium-term uptrend.