Brazil stocks higher on recovery hopes, real firms

SAO PAULO Aug 24 (Reuters) - Brazilian stocks climbed in morning trading on Monday as investor optimism about a global economic recovery continued, boosting demand for riskier emerging market assets.

The benchmark Bovespa index .BVSP hit a new 2009 high in intraday trading, notching 58,402.75 before settling back at 58,341.75, a 1.06 percent gain.

Brazil's currency, the real BRBY, strengthened 0.11 percent to 1.829 per dollar, on track for a fifth day of gains.

"It's a continuation of the recent upward movement, a function of strong indicators from the United States," said Ricardo Retz, a trader with Sao Paulo-based Guepardo Investimentos.

Recent numbers from the United States, including existing home sales last week, have suggested the world's largest economy has begun turning the corner on recession.

If data keep showing a U.S. recovery, Retz said, the Bovespa could climb even higher. Poor numbers, though, could lead to short-term profit-taking.

"Any data off the curve, and there's lots of fat to burn," he added.

Leading gains were shares of Petrobras and Vale, the two most heavily-weighted stocks in the index. The state-controlled energy company Petrobras (PETR4.SA) added 1.37 percent to 34.09 reais, boosted by a 0.84 percent rise in crude oil CLc1 as investors hoped for a rebound in global energy demand.

Mining company Vale (VALE5.SA), the world's largest iron ore producer, climbed 2.02 percent to 33.86 reais. Increased capacity utilization, higher volumes and higher iron ore prices "should lead to significantly higher earnings for Vale" through 2010, noted a market strategy note from Barclays Capital dated Monday, adding that Vale remains expensive compared to peers.

Steelmakers also rose. Gerdau (GGBR4.SA), Brazil's biggest steelmaker, gained 0.93 percent to 22.88 reais, as Usiminas (USIM5.SA) climbed 0.54 percent to 48.56 reais and CSN (CSNA3.SA) advanced 2.21 percent to 51.41 reais.

Shares of insurer Porto Seguro (PSSA3.SA), which is not part of the index, shot up 9.06 percent to 17.45 reais on an announced merger of automobile and residential insurance business with Itau Unibanco (ITUB4.SA), Brazil's largest private-sector bank by assets. Itau Unibanco climbed 1.61 percent to 34.75 reais. [ID:nN24135287]

The real continued its previous four days of gains. The real has been strengthened recently by strong inflows of dollars into Brazil.

But, cautioned Pedro Tuesta, senior economist at 4Cast in Washington, gains in the real may lose steam in coming days as investors remain skittish of increasing exposure to the country's currency.

Changes in yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed, with contracts due beyond 2010 largely flat or inching upward as investors remain wary of the future of Brazil's benchmark interest rate. The rate, called the Selic, is at a record-low 8.75 percent.

Speculation that central bank chief Henrique Meirelles could join a political party and run for the governorship of the state of Goias next year has added to volatility in long-term contracts. (Reporting by Luciana Lopez; Additional reporting by Guillermo Parra-Bernal. editing by W Simon)