Brazil stocks choppy on recovery views, real firms

SAO PAULO Feb 8 (Reuters) - Brazilian stocks rose in early trading on Monday, led by mining giant Vale, despite continuing concern over deteriorating government finances in some euro zone countries.

The benchmark Bovespa index .BVSP advanced 0.8 percent to 63,270.18 near mid-day on Monday, after having retreated for the past three sessions. The index dipped into and out of negative territory during the morning.

Global investors are worried that ballooning government public deficits in Greece, Portugal, Ireland and Spain might hamper the euro zone's economy and derail the global economic recovery. Jitters over the strength of the recovery has grown in recent weeks, prompting investors to shun riskier assets, including Brazilian equities, worldwide.

"The external climate hasn't changed," said Debora Morsch, chief executive of Solidus brokerage.

Yet, she noted, Brazilian fundamentals have not changed, either -- the country is still expected to grow 5.35 percent in 2010, according to the latest central bank survey of local economists, released on Monday.

The Bovespa's losses last week opened space for investors to scoop up stocks, Morsch added. "But I don't know if there will be enough momentum to keep this up today."

Brazil's currency, the real BRBY, strengthened 1 percent to 1.872 per dollar as the greenback slipped against a basket of major currencies .DXY.

The real shed 1.58 percent against the dollar in the previous week.

Commodities gained on the weaker dollar. The Reuters-Jefferies index .CRB advanced 0.4 percent.

Among stocks on Monday, Vale (VALE5.SA), the world's largest producer of iron ore, led gains. Those shares added 1.3 percent to 41.33 reais.

The company on Friday said it will continue to push its Sudbury, Ontario, nickel and copper operations toward full production, despite an ongoing strike. [ID:nN05165759]

Shares of BM&FBovespa (BVMF3.SA), the world's fourth-largest exchange operator by market value, rose 2.3 percent to 11.66 reais. Those shares had plunged about 12 percent over the past three sessions.

State-controlled energy company Petrobras (PETR4.SA), the most heavily-weighted stock in the index, rose 0.5 percent to 31.70 reais. Crude oil CLc1 traded nearly flat.

Homebuilder Gafisa (GFSA3.SA) moved up 1.68 percent to 23.60 reais. The company, Brazil's second largest real estate developer, reports fourth-quarter results after the bell on Monday. Analysts expect net income to have edged up on government efforts to spur the housing sector. [ID:nN08150060]

Changes in yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed, with shorter-term contracts inching higher even as longer-term contracts dipped.

The yield on the contract due January 2011 DIJF1 edged to 10.25 percent from 10.23 percent. The yield on the contract due January 2012 DIJF2 dipped to 11.45 percent from 11.49 percent.

Both were among the most active contracts of the morning.

The weekly central bank survey found that local economists see Brazil's inflation rate hitting 4.78 percent in 2010.

That is above the center of the government's target of 4.5 percent, plus or minus 2 percentage points, for 2010 inflation. (Reporting by Luciana Lopez, Editing by Chizu Nomiyama)