Brazilian stocks rose on Wednesday, propelled by positive sentiment on European markets while the currency recovered Tuesdays losses against the dollar.

The Bovespa index .BVSP added 1.79 percent to 63,764.42, extending the previous days gains which came on the back of upbeat results from Itau Unbanco. The index has gained 69 percent so far this year.

Setting a positive backdrop for the Bovespa index was news that the euro zones service sector expanded for the second consecutive month and at its fastest in the past in 22 months, pushing European stocks higher.

World stocks rose from the previous days four-week low on Wednesday while the dollar slipped ahead of a policy decision by the Federal Reserve, expected to affirm its commitment to ultra-low interest rates.

Brazils currency, the real, (BRBY) strengthened about 1 percent to stand at 1.728 per dollar.

Steel manufacturers figured among the biggest gainers on Wednesday, buoyed by news of a surge in profit at Brazils CSN (CSNA3.SA) to 1.15 billion reais, almost double what analysts expected. Its shares rose 2.63 percent to 60.14 reais. Shares in rival Gerdau (GGBR4.SA) jumped 3.72 percent to 27.60 reais. Usiminas stock surged 3.46 reais to 47.50 reais.

Heavyweights miner Vale (VALE5.SA) and state-controlled Petrobras (PETR4.SA) also rose in line with higher copper and energy prices. Vale shares rose 1.68 percent to 41.65 reais and stock in Petrobras climbed 1.72 percent to 36.16 reais.

Financial stocks were also buoyant one day after Itau Unibanco (ITUB4.SA), Brazils largest private-secor bank by assets, posted an unexpected increase in third-quarter profits.

Itau Unibanco gained 1.25 percent to 35.70 reais, while Banco do Brasil (BBAS3.SA) rose 1.44 percent to 29.50 reais. Bucking the trend, Banco Bradesco (BBDC4.SA) shed 0.54 percent to 35.09 reais afer it reported earnings below analysts expectations. [nN19362379].

Yields on Brazilian interest rate futures contracts <0#DIJ:> were mixed with the central bank expected to keep interest rates on hold at a record-low of 8.75 percent until the end of the year and to only raise them in 2010.