Brazil's stocks advance, real strengthens

SAO PAULO Dec 28 (Reuters) - Brazilian stocks rallied on Monday, tracking gains in Asian and European equities after data released earlier in the day suggested a global economic recovery is gaining momentum.

The benchmark Bovespa .BVSP stock index advanced 0.9 percent to 68,181.66, the highest level since Dec. 16. The real BRBY, Brazil's currency, strengthened almost 1 percent against the U.S. dollar to 1.737 as exporters brought in some of their proceeds before year-end.

Investor optimism firmed after Japan's government released data showing factory output rose for the ninth straight month in November. Chinese stocks also jumped after Premier Wen Jiabao indicated on Sunday the government is unlikely to withdraw its stimulus package until a recovery is well-cemented.

"Bourses are on the rise and commodity prices will follow suit thanks to the news coming from Asia," according to a Monday report by Sao Paulo-based Banco Fator's economic and market research department.

Oil CLc1 gained 0.6 percent to $78.61 a barrel, and the Reuters-Jefferies CRB index .CRB, a commodities benchmark, ticked higher for a fourth day, up 0.5 percent.

Vale (VALE5.SA), the world's biggest producer of iron ore, led gains in the Bovespa with a 1 percent jump to 42.59 reais. Output of the mineral will probably return to 2008 levels next year, Chief Executive Roger Agnelli said last week.

Preferred shares of Petrobras (PETR4.SA), the state-controlled oil company, rose 0.5 percent to 36.9 reais as oil climbed in international markets, traders said.

Banks also treaded higher, led by Itau Unibanco (ITUB4.SA), the largest non-government bank holding company. On Dec. 22, Banco Santander strategists recommended the Sao Paulo-based lender among a group of Brazil companies whose stocks are likely to gain in 2010.

Currency inflows have bolstered valuations in Brazil's equity market, with the Bovespa gaining more than 80 percent so far this year. Traders in the spot currency market said about $200 million were brought in by a company in the oil industry on Monday.

More volatility in the currency and stock markets is expected through year-end as light trading volumes exacerbate price fluctuations and as futures contracts are settled, forcing some investors to enter the spot markets.

The Bovespa futures contract due in February 2010 INDG0 climbed 1 percent to 69,000 points.

Yields on interest rate futures contracts <0#DIJ:> were little changed. The yield on the Jan. 2010 contract DIJF1 rose 1 basis point to 10.43 in late morning trading on light volume.

Future yields contracts are used by investors to bet on the level of the Selic rate, Brazil's central bank's policy rate. (Reporting by Guillermo Parra-Bernal and Silvio Cascione; Editing by Padraic Cassidy)