Oct. 29 (Bloomberg) -- Brazilian stocks surged, rebounding from the biggest drop in seven months, after the U.S. economy grew for the first time in more than a year and companies from Vale SA to Cia. Brasileira de Meios de Pagamento reported better-than-estimated profit.

Vale, the world’s biggest iron-ore producer, jumped more than 8 percent after saying a quicker-than-expected end to the global recession is prompting increased demand for metals. Gerdau SA, the steelmaker that gets about 40 percent of revenue from North America, gained the most in two weeks after the U.S. economy expanded at a 3.5 percent pace in the third quarter. Cia. Brasileira de Meios de Pagamento increased 5.9 percent after the card-payment processor beat profit estimates.

“Up to yesterday there was some pretty weak data coming out about the U.S. economy, with some important banks cutting growth estimates to 2.5 percent, so when it came out at 3.5 percent, markets jumped,” said Alvaro Bandeira, director of Rio de Janeiro-based Agora Corretora, Brazil’s second-biggest brokerage. While Vale reported a year-over-year drop in profit, “compared with the second quarter Vale grew more than 100 percent, which helps bolster the outlook for a more favorable environment,” he said in a phone interview.

The Bovespa index climbed 5.9 percent to 63,720.58, the biggest gain since May. All but one stock in the 63-member gauge gained. The BM&FBovespa Small Cap Index added 5.3 percent. The real surged the most in four months, halting a three-day drop.

In other Latin American markets, Mexico’s Bolsa index gained 2 percent, Argentina’s Merval rose 4.1 percent and Chile’s Ipsa added 1.5 percent. The MSCI Emerging Markets Index increased 0.5 percent.

Bovespa Correction

The Bovespa’s gain pared its retreat from a 16-month high on Oct. 19 to 5.2 percent. The measure tumbled 4.8 percent yesterday to fall more than 10 percent from its peak, the definition of a so-called correction.

Brazil is the second-favorite market of investors after China, according to the Bloomberg Global Poll. China garnered the most votes from investors when they were asked to pick which one or two markets would offer the best opportunities over the next year. Respondents see commodities as the asset of choice, replacing stocks as the most desirable investment class in last quarter’s survey.

Global stocks rallied after a Commerce Department report showed that the U.S. economy, the world’s largest, expanded from July through September, exceeding the median estimate of 3.2 percent of economists surveyed by Bloomberg News.

‘Really Strong’

Vale rose 8.6 percent to 41.10 reais. The Rio de Janeiro- based company said yesterday that net income fell to $1.68 billion, or 31 cents per share, from $4.82 billion, or 94 cents, in the year-earlier period. The company was forecast to report earnings per share excluding some items of 28.7 cents, according to the average of 10 analysts in a Bloomberg survey.

“The result was well above what analysts were expecting,” Alexandre Miguel, an analyst with Itau Unibanco Holding SA in Sao Paulo, said in an interview. “Compared with the second quarter, the iron-ore sales volume was a surprise, really strong. The market certainly recovered in the third quarter.”

The Bloomberg Base Metals 3-Month Price Commodity Index rose the most in a week, adding 3.2 percent.

MMX Mineracao & Metalicos SA, the iron-ore producer controlled by Eike Batista, jumped 12 percent to 12.19 reais after plunging 17 percent in the past five days. Cia. Siderurgica Nacional SA, the Brazilian steelmaker that gets about 15 percent of revenue from mining, gained 5.5 percent.

Gerdau, Latin America’s biggest steelmaker, rose 7.7 percent to 27.50 reais.

VisaNet, Renner

VisaNet, as the Brazilian processor of Visa Inc. payments is known, gained 5.9 percent to 17 reais. The company said profit rose to 396.7 million reais, beating the 379 million-real mean estimate of four analysts surveyed by Bloomberg.

Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, jumped 11 percent to 32.71 reais. The Porto Alegre, Brazil-based company will likely report a growth in sales at stores open at least a year, after shrinking 2.2 percent in the first nine months of 2009, Raymond James & Associates Inc. analyst Federico Rey-Marino wrote in a note to clients, citing company comments during yesterday’s conference call. Barclays Plc reiterated an “overweight” rating.

The Bovespa has rallied 70 percent this year on prospects rising consumer demand, record-low interest rates and rebounding commodity prices will fuel economic growth. It plunged the most among the world’s 30 biggest markets from Oct. 19 through yesterday after the government imposed a 2 percent tax on international purchases of stocks and fixed-income assets to stem a gain in the currency.

Currency Gain

The real surged 2.6 percent to 1.7328 per U.S. dollar on speculation the government will resist implementing more measures to halt a 33 percent rally this year.

“The high volatility in the last days lowered the chance of a new measure,” said Caio Megale, economist at Maua Sekular, which manages 1 billion reais ($575.8 million) in assets.

In Mexico, Grupo Financiero Banorte SAB climbed the most in seven months, adding 14 percent to 44.26 pesos.

Mario Pierry, a New York-based analyst at Deutsche Bank AG, said the positive U.S. GDP figures and an improvement in asset quality signal the bank is in a “solid position.”

“They grew too aggressively in credit cards in the last few years, but it looks like the pace of new delinquencies has decelerated,” he said in an interview. “The outlook with the U.S. growing 4 percent should rub off on Mexico.”

Consorcio Ara SAB added 6.6 percent to 8.71 pesos. Mexico’s fourth-largest homebuilder was raised to “buy” from “hold” at Banco Santander SA, which said it expects the company to return to its “traditional consistency.”

Controladora Comercial Mexicana SAB jumped 4.7 percent to 10.48 pesos. The retailer posted third-quarter profit of 136.7 million pesos ($10.4 million) and revenue of 14.3 billion pesos.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

Last Updated: October 29, 2009 17:50 EDT