Brazil stocks higher on growth outlook, real flat

(Updates to close)

SAO PAULO Oct 22 (Reuters) - Investors took advantage of a recent sell-off in Brazilian stock and scooped up shares on Thursday after strong jobs data and a Wall St rally.

While Brazil's benchmark Bovespa index .BVSP advanced on Wednesday, those gains weren't enough to erase the 2.88 percent dive the index took on Tuesday, when a 2 percent government tax on capital inflows into fixed-income investments and stocks kicked in.

Investors thus saw a chance to pick up stocks in a country expected to post strong growth next year, pushing the benchmark index to close up 0.99 percent to 66,134.97 on Thursday.

New data reinforced hopes for Brazil's future growth, with September unemployment falling to a nine-month low. [ID:nN22532930]

"It's hard to convince someone to get out of the game just because of 2 percent," said Paulo Albano, an analyst at Guepardo Investimentos. The lower prices on Tuesday, he noted, simply gave more investors buying opportunities.

The tax is a bid by the government to brake the acceleration of the country's currency, the real BRBY.

The real closed flat at 1.726 to the dollar, as capital inflows buoyed Brazil's currency and helped it reverse losses to the dollar toward the end of the day.

Stocks in the United States also rose, with the Dow Jones industrial average .DJI adding 1.3 percent on strong earnings from a slew of companies.

Because the United States is the world's largest economy, Brazilian investors often look to markets there to gauge international sentiment and risk appetite.

Leading gains in the Bovespa index were the two most heavily weighted stocks, Petrobras and Vale.

State-controlled energy company Petrobras (PETR4.SA) gained 0.82 percent to 37 reais. Vale (VALE5.SA), the world's largest iron ore producer, put on 2.28 percent to 41.70 reais.

Vale should report strong third quarter results driven mainly by iron demand recovery outside China and higher iron ore spot price, noted a report from Merrill Lynch dated Wednesday.

Steelmaker Usiminas (USIM5.SA) closed down 0.42 percent to 51.99 reais on choppy trading. The company reported a 23 percent third quarter drop in net income on Wednesday. [ID:nN21480983]

Rivals Gerdau (GGBR4.SA) and CSN (CSNA3.SA) gained, Gerdau by 1.19 percent to 29.70 reais and CSN by 0.55 percent to 63.85 reais.

Changes in yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed, with shorter-term contracts slipping but longer-term contracts ticking higher.

The yield on the contract due January 2011 DIJF1 dipped to 10.28 percent from 10.37 percent. The yield on the contract due July 2010 DIJN0 declined to 9.14 percent from 9.23 percent.

Central bank policymakers left Brazil's benchmark interest rate, the Selic, untouched at a record-low 8.75 percent at the end of their two-day meeting on Wednesday evening.

The accompanying statement said the monetary committee sees this level of interest rate as consistent with a scenario for benign inflation. [ID:nN21455080].

The bank used the same statement to explain the move that it used at September's meeting, when policymakers kept the rate steady for the first time after an easing cycle of a cumulative 500 basis points begun in January. (Reporting by Luciana Lopez)