Brazil equities eke out gain as currency weakens

(Updates to close)

SAO PAULO Oct 26 (Reuters) - Brazilian stocks eked out gains on Monday after following a global sell-off for much of the afternoon.

Brazil's benchmark Bovespa index .BVSP edged up 0.04 percent to close at 65,085.55 on Monday.

The index had spent much of the afternoon following U.S. markets down, as investors dumped stock in financial companies and home builders in the world's largest economy.

But investors in Brazil saw the lower share prices as an entry into an economy that's bounced back harder and faster from the global financial crisis than many developing nations, pushing prices back up shortly before the close of day.

"People are seeing slumps as a chance to get into Brazilian stocks," said Adriano Moreno, a strategist with Futura Investimentos.

Investors who did not buy into the Brazilian equities market earlier this year are now playing catch-up, making downturns in Brazilians stocks these days brief, he added.

Brazil's currency, the real BRBY, weakened 1.23 percent to 1.735 per dollar as the greenback advanced against a basket of major currencies .DXY on a dent in risk appetite. [ID:nN26183756]

As the week wears on, data from the United States will likely give investors their cues, said said Andre Luis Querne, a partner at Rio Gestao de Recursos.

"This week is more about monitoring the American market," he added.

Among the expected data are the U.S. third-quarter gross domestic product, which could show the world's largest economy has stopped contracting.

The data could show U.S. GDP growth of 3.2 percent in the third quarter, according to economists polled by Reuters. The figure is due on Thursday. [ID:nN23126614]

Among Brazilian stocks heavyweights Petrobras and Vale led gains in the Bovespa index.

State-controlled energy giant Petrobras (PETR4.SA) rose 0.55 percent to 36.70 reais.

Mining company Vale (VALE5.SA), the world's largest iron ore producer, gained 1.24 percent to 41.51 reais. Vale reports third-quarter results on Wednesday.

Those numbers will likely show an improvement in global iron demand, noted a report from Brascan brokerage dated Monday, including not only China but also Japan and Europe.

Banks tumbled. Banco do Brasil (BBAS3.SA), Latin America's largest bank by assets, slid 1.09 percent to 30.07 reais, Itau Unibanco (ITUB4.SA) dipped 0.14 percent to 36.30 reais and Bradesco (BBDC4.SA) lost 0.82 percent to 36.25 reais.

Changes in yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed, with a number of contracts ticking higher.

The yield on the contract due January 2011 DIJF1 edged higher to 10.29 percent from 10.24 percent. The yield on the contract due January 2012 DIJF2 rose to 11.53 percent from 11.5 percent.

The two were among the most highly traded contracts of the day. Investors use the contracts to bet on trends in the country's benchmark interest rate, the Selic.

Last week central bank policymakers unanimously voted to keep the Selic at its record-low 8.75 percent for a second straight time.

The minutes from that meeting are due on Thursday. Investors will scour the document, hoping for clues as to when the bank will begin to hike rates. (Reporting by Luciana Lopez)