Brazil stocks rise, led by mining and steelmakers

SAO PAULO Jan 13 (Reuters) - Brazilian stocks rose in early trade on Wednesday, led by mining and steel companies on expectations of rising iron ore prices through the year.

The benchmark Bovespa index .BVSP added 0.59 percent to 70,491.13 early in the session, after having fallen the day before on profit-taking and news from the United States and China.

Vale (VALE5.SA), the world's largest producer of iron ore and the index's second-biggest stock, led gains with an advance of 1.16 percent to 46.38 reais.

Mining company MMX (MMXM3.SA) moved up 5.98 percent to 15.06 reais.

Among steelmakers, CSN (CSNA3.SA) put on 1.95 percent to 58.63 reais, Gerdau (GGBR4.SA) climbed 0.78 percent to 29.58 reais and Usiminas (USIM5.SA) advanced 0.71 percent to 49.96 reais.

"The mining and steel sectors are the highlight today," said Hersz Ferman, an economist with Um Investimentos, noting that those stocks are among the Bovespa's most active.

"(W)e now believe (iron ore prices) should rise 35 percent in 2010 (vs. +5 percent in our previous estimates)," according to a research update from Bradesco dated Monday.

State-controlled energy giant Petrobras (PETR4.SA), the index's most heavily-weighted stock, saw choppy trading, adding 0.22 percent to 36.44 reais near mid-day. It was last trading down .04 percent at 36.20 reais. Crude oil CLc1 fell 0.78 percent. Inventories in the United States likely rose last week as imports increased for the second straight week, a Reuters poll showed on Tuesday. [ID:nN12117907]

Brazil's currency, the real BRBY, strengthened 0.4 percent to 1.741 per dollar. The greenback slipped against a basket of major currencies .DXY as the euro hit a one-month high against the U.S. currency. [ID:nLDE60C0Z2]

Yields on Brazilian interest rate futures contracts <0#DIJ:> broadly dipped after data showed that December inflation slowed to 0.37 percent from 0.41 percent in November. [ID:nN13217132]

Brazil's 2009 inflation rate tallied 4.31 percent, below the center of the government's target for the year, pegged at 4.5 percent plus or minus 2 percentage points.

The yield on the contract due January 2011 DIJF1 slipped to 10.32 percent from 10.37 percent. The yield on the contract due July 2010 DIJN0 dipped to 9.11 percent from 9.13 percent.

Both were among the morning's most active contracts.

Brazilian policymakers use the inflation target as a guide in setting the benchmark interest rate, the Selic, currently at a record-low 8.75 percent.

As Brazil's economy has recovered, many analysts have been betting that rate hikes will come at some point in 2010, though opinion remains divided as to when.

With 2009 inflation squarely within the government target and December inflation under control, the central bank could have less reason to hike the benchmark rate in the short term.

"(W)e think that the near term inflation dynamics ... will give the (Brazilian central bank) time to 'watch and wait' and start to hike only in June," wrote Tony Volpon, a Latin America strategist with Nomura Securities International, in an emailed note. (Reporting by Luciana Lopez; Editing by Theodore d'Afflisio)