Oct. 22 (Bloomberg) -- Brazilian stocks gained for a second day as the unemployment rate fell more than analysts expected and accelerating Chinese economic growth bolstered the outlook for exporters of oil and metals.

Tam SA and Gol Linhas Aereas Inteligentes SA, Brazil’s biggest airlines, rallied the most in a week after Latin America’s largest economy added jobs and the central bank signaled no increase in borrowing costs is imminent. Vale SA, the world’s biggest iron ore miner, advanced to its highest level in 15 months after rival BHP Billiton Ltd.’s chairman said he sees “unprecedented growth” for minerals on Chinese demand. BM&FBovespa jumped 1.8 percent after Latin America’s biggest exchange was raised to “buy” at Deutsche Bank AG.

“The unemployment number was good and China is still strong,” said Debora Morsch, who helps manage $305 million at Solidus Brokerage in Porto Alegre, Brazil. “The central bank also made it pretty clear that they aren’t going to touch rates in the short term.”

The Bovespa index rose 1 percent to 66,134.94. Mexico’s Bolsa declined 0.4 percent and the MSCI Emerging Markets index slid 0.5 percent. The real strengthened 0.9 percent to 1.7185 against the dollar.

Brazil’s unemployment rate fell to 7.7 percent in September from 8.1 percent the month before. The unemployment rate was expected to fall to 8.0 percent, according to the median of 27 forecasts in a Bloomberg survey.

“This is a sign we’re in a solid recovery,” said Pezco Pesquisa e Consultoria’s Frederico Turolla, the only analyst who correctly forecast the drop.

Airlines Jump

Gol, Brazil’s second-largest air carrier advanced 3.9 percent to 18.61 reais. Tam, the biggest airline by passengers carried, gained 4.5 percent to 25.80 reais.

Airline “companies have announced that they’re going to raise fares in the fourth quarter and in 2010 too,” said Kelly Trentin, an analyst with SLW Corretora de Valores e Cambio Ltda. in Sao Paulo. “It tells the market that the problem of lower fares was left in the third quarter, and in the fourth quarter that won’t happen anymore.”

The central bank kept its key interest rate at a record low last night and said its level was “consistent” with a non- inflationary recovery, signaling that no increase in borrowing costs is imminent. The bank, in a statement accompanying the board’s unanimous decision to keep the benchmark rate at 8.75 percent, repeated word-for- word the communique issued Sept. 2 when it paused after five straight cuts this year.

Yields on the interest rate future contracts fell across board this morning, signaling investors are tempering expectations the bank board will raise rates early next year.

Banks Rally

Homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes rose 1.6 percent to 25.20 reais, as low borrowing costs may stoke demand for housing loans.

The MSCI Brazil financial index had the biggest gain among the 10 industry groups, rising 2.9 percent. Banco Bradesco SA, Brazil’s second-biggest non-government bank gained 2.5 percent to 36.91 reais.

Vale, the world’s biggest iron ore miner and an exporter to China, gained 93 centavos to 41.70 reais.

“To support Asia’s increased demand for natural resources, we need to increase our resource production,” Don Argus, 71, chairman of BHP, said today in a speech at a lunch in Melbourne. “We stand at the threshold of an era of unprecedented growth due to demand generated by China and, in the future, India.”

BHP yesterday reported record first-quarter production of iron ore as steel companies resume output at mills in China, Europe and the U.S. on signs of recovery in the global economy.

China Economy

China’s economy grew 8.9 percent in the third quarter as stimulus spending and record lending growth helped the nation lead the world out of recession.

Companies such as Vale and Cia de Bebidas das Americas, Latin America’s largest beverage company, are among companies best placed to take advantage of emerging- market growth, RBC Capital Markets said. AmBev gained 2.7 percent to 164.99 reais.

China’s “voracious appetite” for commodities will help emerging markets outperform developed economies in the next few years, RBC analysts led by Nick Chamie, head of emerging markets research, wrote in a note to clients.

BM&FBovespa, which plunged 8.4 percent on Oct. 20 when the tax on foreign purchases of fixed-income securities and stocks was first announced, rose 1.8 percent to 12.74 reais today.

President Lula said his government is ready to change and may even drop the tax if the levy fails to curb the Brazilian currency’s gain, Folha de S. Paulo newspaper reported.

Natura Cosmeticos SA, the biggest cosmetics maker, sank 2.7 percent to 32.50 reais. Its third-quarter report yesterday showed a deceleration in sales and earnings growth, even as profit exceeded JPMorgan’s estimates, analyst Andrea Teixeira wrote in a note. She cut the shares to “neutral”.

Mexico Stocks

The Bolsa declined for a second day after companies’ third- quarter results trailed estimates. Telefonos de Mexico SAB, the telephone company controlled by Carlos Slim, reported net income that “came under consensus,” said Eric Wilson, an analyst with Actinver SA in Mexico City. “Everybody wants to see huge growth and Telmex hasn’t been showing it for some time.”

Telmex dropped 1.8 percent to 11.14 reais.

Empresas ICA SAB, Mexico’s largest construction company, declined 1.5 percent to 33 pesos. Net income fell 43 percent from a year ago on higher taxes and a foreign exchange loss.

Grupo Aeroportuario del Sureste SAB, the second- largest private airport operator, dropped 3 percent to 58.68 pesos. Its third-quarter profit fell to 170.1 million pesos ($13.1 million) from 233.9 million pesos a year earlier. Airport traffic “continues to be affected by the fall-out from swine flu,” said Actinver SA equity strategist Francisco Suarez in a note.

In other Latin American markets, Argentina’s Merval rose 2.3 percent and Colombia’s IGBC index declined 0.7 percent.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Emily Schmall in Mexico City at eschmall@bloomberg.net

Last Updated: October 22, 2009 16:32 EDT