Brazil stocks close higher on optimism, real gains

SAO PAULO, Nov 4 (Reuters) - Brazilian stocks closed higher on Wednesday as upbeat European and U.S. economic news whetted appetite for riskier emerging market assets.

The benchmark Bovespa stock index .BVSP climbed 2.03 percent to 63,912.57, adding to gains of the previous session.

Brazil's currency, the real (BRBY), strengthened 0.75 percent to 1.733 per dollar as the greenback weakened against a basket of major currencies .DXY.

Expansion in the euro zone's service sector helped propel gains in the morning. Brazilian stocks were also fueled by Wall Street where shares touched session highs after the Federal Reserve said it would keep borrowing costs near zero for "an extended period of time."

The Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25 percent and said the economy has "continued to pick up" since the last policy meeting in September. For full story, see [ID:nN04453484]

"It didn't bring any surprises," said Newton Rosa, an economist with SulAmerica Investimentos, adding that the statement was not a game changer.

Investors remain drawn to riskier emerging market assets as the global economy appears to be recovering, he added.

Brazil's Bovespa index has climbed about 70 percent so far this year while the national currency has strengthened almost 35 percent against the dollar.

Heavyweight commodity stocks helped boost the Bovespa index on Wednesday. State-controlled energy giant Petrobras (PETR4.SA) rose 0.42 percent to 35.70 reais on the back of a gain in crude prices CLc1.

Mining company Vale (VALE5.SA), the world's largest iron ore producer, added 1.51 percent to 41.58 reais.

Steel manufacturers figured among big gainers as well, buoyed by news of a surge in quarterly profits at Brazil's CSN (CSNA3.SA) to 1.15 billion reais, well above the 543 million reais average net income estimate of six analysts polled by Reuters. Those shares rose 3.07 percent to 60.40 reais.

"CSN is our top pick in LatAm steels, given the exposure to the strong fundamentals of the Brazilian steel market and our constructive view on iron ore prices," noted a report from Merrill Lynch.

Shares in rival Gerdau (GGBR4.SA) jumped 3.31 percent to 27.49 reais. Usiminas (USIM5.SA) stock surged 1.07 percent to 46.40 reais.

Financial stocks were also buoyant one day after Itau Unibanco (ITUB4.SA), Brazil's largest private-sector bank by assets, posted an unexpected increase in third-quarter profits.

Itau Unibanco gained 3.23 percent to 36.40 reais, while Banco do Brasil (BBAS3.SA) rose 2.99 percent to 29.95 reais.

But Bradesco (BBDC4.SA) shed 0.71 percent to 35.03 reais after it reported earnings below analysts' expectations.

Yields on Brazilian interest rate futures contracts <0#dij:> were broadly lower, with the central bank expected to keep interest rates on hold at a record-low of 8.75 percent until the end of the year and to only raise them in 2010.

Investors use the contracts to bet on future trends in the benchmark interest rate.

By Reuters