(Adds dollar repo auction results, updates prices)
SAO PAULO, Sept 19 (Reuters) - Brazilian stocks jumped more than 7 percent on Friday and the national currency strengthened sharply as optimism about a potential U.S. debt rescue plan and measures to ban short selling buoyed global markets.
The benchmark Bovespa index .BVSP of the Sao Paulo Stock Exchange soared 8.2 percent to 52,392.25 in early afternoon trading from a close of 48,422.75 on Thursday, when it had chalked up the biggest one-day gain in almost five months.
All stocks in the index gained, led by 7 percent gains in oil company Petrobras and mining company Vale and a broad-based surge in financial services stocks.
“All prices were distorted. They were crisis prices,” said Roberto Padovani, senior Latin America investment strategist at WestLB Brasil. “Overall, it’s a day of relief, of recovery in prices for most assets.”
Brazil’s currency surged nearly 5 percent after the central bank sold $200 million of $500 million in dollar repurchase agreements offered in an auction to help ease a liquidity crunch. The bank also said it will hold a second auction later on Friday, offering an additional $300 million.
The real BRBY strengthened to 1.829 per dollar from 1.921 on Thursday, when it slumped as much as 5 percent before ending 2.8 percent weaker. The real had lost 7.3 percent of its value in the past four sessions.
The central bank sold the dollar repos for the first time since 2003, when Brazilian markets were recovering from a rout in the run-up to the election of President Luiz Inacio Lula da Silva.
The bank will buy back the dollars at a fixed price on Oct. 23, 30 days after the settlement date, temporarily adding reserves to the banking system.
On the stock exchange, state-run Petrobras (PETR4.SA), the top-weighted stock in the Bovespa index, gained 6.8 percent to 34.39 reais, also getting a boost from a 2 percent rally in crude prices.
Mining giant Vale VALE5.SA climbed 6.7 percent to 36.90 reais as copper prices soared 4.8 percent and industrial metals such as nickel and zinc also gained sharply.
Brazilian financial stocks surged as investors snapped up shares of banks and securities firms around the world.
Shares of BM&F Bovespa (BVMF3.SA), which operates Brazil’s stocks and derivatives exchanges, jumped 13.8 percent to 8.93 reais. Unibanco UBBR11.SA gained 10 percent to 20.25 reais, while Bradesco (BBDC4.SA), Brazil’s largest private sector bank, was up 7.2 percent to 30.33 reais and Itau ITAU4.SA rose 8.4 percent to 31.99 reais. (Reporting by Elzio Barreto and Silvio Cascione; Editing by James Dalgleish)