May 4 (Bloomberg) -- Brazilian stocks rallied, sending the Bovespa above 50,000 points for the first time since September, on speculation improving growth prospects for the country’s two biggest export markets will spur demand for commodities.

Gerdau SA and Cia. Vale do Rio Doce led gains for metal producers after Chinese manufacturing expanded for the first time in nine months and U.S. construction spending ended a six- month slide. Petroleo Brasileiro SA rose 7 percent after Itau Corretora said the oil producer’s development of the Tupi area is a “major achievement.” Homebuilders Gafisa SA and Rossi Residencial SA climbed more than 10 percent as analysts expect Brazil’s economy to contract less than previously forecast.

“The market is anticipating improvement in the economy,” said Augusto Lange, partner at Neo Gestao de Recursos in Sao Paulo, where he helps manage $400 million in assets. “Investors are a little more excited, especially about commodities like steel, mining, petroleum, pulp.”

The Bovespa jumped 6.6 percent to 50,404.53. Markets across Latin America rallied with those in Mexico and Argentina surging more than 5 percent in the first day of trading since the May 1 holiday. The MSCI Latin American Markets index rose 8.9 percent, the most since Dec. 8.

Brazil’s currency climbed to a six-month high and bond yields fell after economists said the economy shows tentative signs of recovery.

Analysts expect Latin America’s biggest economy to shrink 0.30 percent in 2009, compared with a previous forecast of a 0.39 percent contraction a week earlier, according to the median estimate in an April 30 central bank survey of about 100 economists.

Brazil recovery

The currency strengthened 2.5 percent to 2.1196 per U.S. dollar, from 2.1740 on May 1. The yield on Brazil’s zero-coupon bonds due January 2010 rose five basis points, or 0.05 percentage point, to 9.82 percent.

The Bovespa rallied 16 percent last month after interest rates were cut to a record low and earnings improvements stoked speculation the worst of the global recession is over. The gauge has climbed 32 percent this year.

Emerging-market stocks may “break out” into a bull market at the end of the year as falling interest rates and easing inflation make equities more attractive, Templeton Asset Management Ltd.’s Mark Mobius said. The MSCI Emerging Markets index gained 6 percent today to the highest since October.

The gains, buoyed by “strong” flows from foreign investors since February, may reverse this month, said Debora Morsch, who helps manage about $305 million at Solidus Brokerage in Porto Alegre, Brazil.

‘Cautious’

“Since the middle of March we’ve had gains of almost 40 percent without any weekly drops,” Morsch said in a phone interview. “Those are very strong gains, and people who have been out of the market need to be cautious before coming back.”

Foreign investors bought 3.1 billion reais ($1.5 billion) more in stocks than they sold last month, the largest monthly net inflow since April 2008, according to data compiled by the Sao Paulo-based exchange BM&FBovespa SA through April 28.

Gerdau, Latin America’s biggest steelmaker, rose 8.9 percent to 17.10 reais. Usinas Siderurgicas de Minas Gerais SA, the second-largest steelmaker, rose 6.2 percent, while third- biggest Cia. Siderurgica Nacional SA added 7.2 percent to 42.80.

Copper and zinc rose by the exchange-imposed 6 percent daily limit in Shanghai on an improved demand outlook. Two separate indexes showed China’s manufacturing was above 50 in April, indicating an expansion.

The Purchasing Managers’ Index gained to 50.1 from 44.8 in March, and the official index climbed for a second straight month to 53.5 in April, after declines in export orders moderated and investment surged because of the government’s stimulus package.

Vale Gains

Vale added 8.8 percent to 33.15 reais after Goldman Sachs Group Inc. said ore prices will bottom this quarter as demand from China rebounds.

“We now believe that the current quarter will mark the bottom of the price cycle for spot iron ore,” Goldman Sachs analysts Malcolm Southwood and Paul Gray said in a May 1 report.

Petrobras rose 7.1 percent to 31.63 reais. The oil company’s “aggressive approach” to developing its Tupi presalt area may lead to faster cash generation, Itau Corretora wrote. The offshore Tupi field discovery is the largest since Mexico’s Cantarell find in 1976.

Gafisa, the second-biggest builder, was raised from “underweight” at Barclays, which said a planned sale of notes reduces funding concerns. Gafisa added 11 percent to 20.90 reais. Bigger rival Cyrela Brazil Realty SA Empreendimentos & Participacoes added 14 percent to 15.30 reais. Rossi gained 10 percent to 8.15 reais.

Bolsa Advances

Mexico’s Bolsa index rose 5.1 percent to 23,014.05, the biggest gain in three weeks. Cemex SAB, the largest cement maker in the Americas, surged 18 percent to 12.13 pesos after the U.S. reported that sales of existing homes rose in March, the first back-to-back gain in almost a year. U.S. construction spending also unexpectedly rose, ending a six-month slide.

“Housing sales and construction spending were better than expected,” said Gonzalo Fernandez, an analyst at Banco Santander SA in Mexico City. “Cemex could benefit from a potential recovery in both these sectors as the U.S. is its largest market in terms of sales.”

Grupo Simec SAB rose the most in over six months, advancing 14 percent to 23.37 pesos. Simec, a unit of Mexico’s largest steelmaker, rose after posting better than expected earnings before interest, taxation, depreciation and amortization for the first quarter, Bulltick Casa de Bolsa SA said.

Chile’s Ipsa index added 3.1 percent to 2,753.99, the steepest gain in six months. Banco Santander Chile rose 5.6 percent to 20.90 pesos after JPMorgan Chase & Co. raised the country’s biggest lender to “overweight” from “neutral.”

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

Last Updated: May 4, 2009 16:50 EDT