Brazil markets close up on choppiness, real weaker

(Updates to close)

SAO PAULO, Nov 11 (Reuters) - For a second straight session Brazilian stocks just barely squeaked out gains at the close of day, as investors on Wednesday balanced long-term growth expectations in Brazil with short-term profit-taking.

The benchmark Bovespa index .BVSP inched up 0.19 percent to 66,431.23, well off the day's highs after choppy trading dominated much of the session. The index posted a 2.71 percent gain on Monday, but spent much of Tuesday in negative territory before eking out a 0.13 percent gain.

"It's a trade-off of forces," said Ricardo Retz de Carvalho of Guepardo Investimentos. While some assets have reached or are reaching fair prices, he said, investors still see good long-term prospects in Brazil.

Brazil's currency, the real (BRBY), reversed course from earlier in the day and weakened 0.29 percent to 1.722 per dollar. The greenback firmed against a basket of major currencies .DXY on Wednesday.

The real has strengthened about 35 percent so far this year as investors have poured dollars into the country. Those gains prompted the government last month to institute a 2 percent tax on capital inflows on equities and fixed-income investments, and talk has abounded about potential further measures.

"I think there's going to be further capital controls," said Kathryn Rooney, a senior emerging markets strategist with Bulltick Capital Markets.

Rooney added that she sees the real trading around 1.70 in 2010.

"There's this euphoria surrounding all things Brazilian," she said. "Brazil is overbought."

Brazilian stocks had risen earlier in the day as stronger-than-expected Chinese industrial data stoked appetite for riskier emerging market assets and reinforced investor optimism about a global economic recovery.

Chinese factory output growth surged to a 19-month high in October. China, the world's third largest economy and a voracious commodities consumer, is widely considered a driver in a global economic recovery. [ID:nPEK212006]

In the stock index heavyweight state-controlled energy giant Petrobras (PETR4.SA) led gains, rising 0.51 percent to 37.60 reais. The company said on Wednesday it found oil in deep waters off Angola. [ID:nN11371511]

BM&FBovespa (BVMF3.SA), the world's fourth-largest exchange operator by market value, climbed 1.85 percent to 12.69 reais. The company sees better-than-expected stock and derivatives trading volumes in 2009 helping to stoke earnings, its CFO said in a conference call on Wednesday. [ID:nN11251509]

Mining giant Vale (VALE5.SA), the world's largest iron ore producer, led losses, slipping 0.75 percent to 42.33 reais.

Yields on Brazilian interest rate futures contracts <0#DIJ:> largely ticked higher.

Investors use the contracts to bet on trends in the country's benchmark interest rate, the Selic, currently at a record-low 8.75 percent.

Brazilian inflation quickened in October over September, though inflation over the past 12 months remained within policymakers' 2009 target of 4.5 percent, plus or minus 2 percentage points. [ID:nN11362114]

(Reporting by Luciana Lopez; Editing by Diane Craft)