Brazil stocks, real firm on jobs, euro fears easing

SAO PAULO

Thu May 27, 2010 12:38pm EDT

SAO PAULO May 27 (Reuters) - A surprise drop in Brazil's unemployment rate helped lure investors back to Latin America's largest economy on Thursday, boosting local shares to their highest trading levels in over a week.

At the same time, fears over the euro zone debt crisis, which has prompted a stampede out of riskier assets in recent weeks, subsided after China denied a report that it was reviewing its euro zone sovereign bond holdings.

Unemployment in Brazil unexpectedly fell in April to its lowest level for that month since the government began tracking the data in 2002.

Brazil's jobless rate BRUNR=ECI dropped to 7.3 percent in April from 7.6 percent in March, statistics agency IBGE said on Thursday.

"The figures confirm our view that the labor market is very tight and enterprises are facing difficulties finding available workers to hire," Santander analysts wrote in a note to clients dated Thursday.

Brazil's benchmark Bovespa stock index . climbed 2.3 percent to 61,578.54 points, adding to gains in the previous session and touching its highest intraday levels since May 18.
The currency, the real (also strengthened on the return to riskier assets, jumping 2.2 percent to 1.829 per dollar.

Investors have begun to focus again on the attractive prospects of Brazil's economic growth, said Marianna Costa, an economist with Link Investimentos in Sao Paulo.

Despite the euro zone fiscal worries, Brazil's economy is in solid shape to grow this year, she added.

Such worries have rattled investors for months with a report late on Wednesday that China could reduce its reserves of the single euro zone currency stoking fears of contagion.

"Of course we have major concerns about how the European crisis will affect Brazil, but for now there are no signs that the real economy will be hit in a bad way," Costa said.

Market heavyweights Vale and Petrobras led gains on the Bovespa index.

Mining company Vale (the world's largest producer of iron ore, jumped 4.7 percent to 41.47 reais.
State-controlled energy company Petrobras (put on 2.59 percent to 27.75 reais as crude oil CLc1 futures surged, following a global bounce in equities.

Steelmakers also posted strong advances. Gerdau rose 4.78 percent to 24.10 reais, CSN (gained 4.41 percent to 27.20 reais and Usiminas (climbed 2.7 percent to 45.19 reais).