Brazil stocks, real surge on Fed liquidity move

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SAO PAULO, March 11 (Reuters) - Brazil stocks posted the biggest one-day jump in nearly two months on Tuesday led by mining giant Vale and the currency surged as investors flocked back to the country after a joint move the central banks around the world to increase market liquidity.

The Bovespa index .BVSP of the Sao Paulo Stock Exchange surged 3.95 percent to to 62,367.72 points, its biggest gain since jumping 5.95 percent on Jan. 24. The index closed at a one-month low of 59,999.27 on Monday.

Shares of Vale, state-controlled oil company Petrobras and steelmakers Usiminas and CSN led the gains, as investors went bargain hunting for shares that had tumbled in previous sessions.

In foreign exchange trading, the Brazilian real BRBY BRL= strengthened about 1.4 percent to 1.684 per dollar. The currency has gained about 5.5 percent in 2008 and is trading near its strongest levels since May 1999 as overseas investors pour dollars into the country to benefit from high local interest rates.

In a statement earlier on Tuesday, the U.S. Federal Reserve said it was expanding a securities lending program "to foster the function of financial markets" in a combined effort with central banks in Europe, Canada, Japan to deal with pressures in global markets. The move helped ease concerns of a renewed credit crunch that could reduce demand for emerging market assets.

"It helps soften the crisis because in theory it removes the risk of imminent (bank) failures," Sidnei Nehme, executive director at the NGO brokerage, said in a report.

Yield spreads of Brazil's overseas bonds over comparable U.S. Treasuries as measured by JPMorgan's EMBI+ index tightened sharply, reflecting a decrease in investor risk aversion toward Brazil assets. The index 11EMJ showed the country's bond spread narrowed 22 basis points to 262 over comparable Treasuries.

Interest-rate futures <0#DIJ:> on the BM&F commodities and futures exchange in Sao Paulo fell after government data showed inflation slowed for a second straight month in February.

At the stock market, mining giant Vale (VALE5.SA) jumped 5.28 percent to 48.49 reais, snapping three days of losses that pushed the stock 7.1 percent lower. Brazilian peasant farmers ended on Monday a daylong blockade of a railroad operated by Vale that transports 300,000 tonnes of iron ore a day.

State-controlled oil giant Petrobras (PETR4.SA), the heaviest weighted stock in the Bovespa index, rose 3.92 percent to 79.71 reais as crude prices rose to a record. The stock had lost about 4.8 percent over the previous three sessions.

Usiminas (USIM5.SA), Brazil's largest producer of steel used in home appliances and in the auto industry, jumped 5.41 percent to 100.4 reais. The stock had lost 8.5 percent over the previous four sessions.

Steelmaker CSN (CSNA3.SA) gained 2.32 percent to 62.21 reais. The company said late on Monday its fourth-quarter profit jumped to 508 million reais from 83.4 million reais a year earlier fueled by strong domestic demand, which accounts for about three quarters of total sales. (Reporting by Elzio Barreto and Silvio Cascione; editing by Gary Crosse)