By Carla Mozee

Brazilian equities rose to a six-month high Thursday in a broad-based rally that benefited from a climb in commodity prices, and Chilean stocks gained in the run-up to the central bank's interest rate cut after the market close.

The markets were also aided by a rally on Wall Street after a spate of positive developments from the financial sector.

Brazil's Bovespa finished up 3.1% at 45,538.71, its highest closing level since Oct. 2.

The rally was led by shares of Embraer (ERJ), up 9.1% after local newspaper Estado said the aircraft producer is aiming to sell more military planes to various governments as a way to offset declining sales to commercial air carriers and private entities.

Online retailer B2W Companhia Global do Varejo rose 4.3%, building on its 12% rise in the previous session after HSBC initiated coverage on the company with an outperform rating.

However, shares of Banco do Brasil continued to fall after a steep decline Wednesday. The sell-off was prompted by the firing of the bank's chief executive by the president of Brazil.

Shares of Bovespa heavyweight Petroleo Brasileiro (PBR) rose 4.4% Thursday on the back of a 5.8% leap in crude-oil prices to $52.24.

Fellow market heavyweight and iron-ore giant Companhia Vale do Rio Doce (RIO) surged 5%. Shares of steelmakers Gerdau (GGB) and CSN (SID) climbed 3.8% and 4%, respectively, as base metals prices strengthened.

Trading will be closed Friday for the Good Friday holiday. For the week, the Bovespa rose 2.6%.

The Reuters/ Jefferies CRB Index (CRB), which tracks commodity prices, rose 1.9%.

Prices for natural resources were bolstered in part by increased optimism that the U.S. economy and financial system are showing signs of stabilization. Wells Fargo & Co. (WFC) surprised investors Thursday by saying it expects a $3 billion record profit in the first quarter, partly due to a fall in loan losses and provisions and a climb in mortgage applications.

Meanwhile, The New York Times reported that regulators expect all 19 banks undergoing stress tests to pass them. But more government aid may still be required, according to the report.

On Wall Street, the S&P 500 Index (SPX) jumped 3.8% and the Dow industrials (DJI) rose 3.1%. The widely watched benchmarks are on track for weekly gains.

"A light week for economic data delivered additional whiffs of stabilization, including a steep liquidation of wholesalers' inventories and a solid increase in real business sales in February," Alan Levenson, chief economist at T.Rowe Price, said in a note Thursday.

"A steadying in the rate of economic contraction is important in its own right as a milestone in the transition from recession to renewed expansion," he said.

Chile plows higher

In Santiago, Chile's IPSA gained 1.7% to 2,585.65 in a shortened session ahead of the Good Friday holiday. The index closed the week up 1.3%.

The banking group rose 1.5% prior to the central bank's interest rate cut.

Banco de Chile (BCH) shares closed 1.9% higher, and Banco de Credito e Inversiones were up 1.7%. Shares of Banco Santander Chile (SAN) rose by 2.1%.

After market close, Banco Central de Chile cut its key interest rate by 50 basis points to 1.75%, meeting market expectations. Before the latest rate reduction, the central bank had cut the benchmark rate by a total of 6 percentage points since January.

Trading in Argentina and Mexico was closed for the Holy Thursday holiday, and will be closed on Friday. Mexico's IPC fell 1.9% on a weekly basis, and Argentina's Merval fell 2.8%.

Banco do Brasil shares under pressure

Shares of Banco do Brasil slumped 2.8%, extending their 8.2% decline Wednesday after Brazilian President Luiz Inacio Lula da Silva fired Antonio Francisco Lima Neto, the chief executive of the country's biggest public-sector bank.

Lula reportedly made the move in an effort to have the high interest rates charged to consumers lowered. Aldemir Bendine was later confirmed as the new CEO. Bendine had served as vice president of credit cards and retail services operations at Banco do Brasil.

Recently, average spreads were standing at 30%, with spreads for individuals surpassing the 40% mark, and roughly 20% for corporations, according to Alejo Rodriguez Cacio, a Brazilian banking analyst at Riedel Research Group.

Consumers who took out personal loans paid an average annual rate of 52.7% in 2008, according to data on the central bank's Web site.

The benchmark lending rate currently stands at 11.25%.

"While Brazil is not unique [and] is not alone in having had high inflation in the past and having successfully cut it to single digits, it is rather unique in not having achieved a consequent reduction in interest spreads," Cacio wrote in e-mailed comments to MarketWatch.

Still, Cacio doesn't believe the banking sector is likely to experience a wave of intervention.

"I believe Lula knows well that he has to maintain a market-friendly approach to his economic moves," he said. And because Bendine is a career banker with Banco do Brasil, "we [do] not to expect great changes in Banco do Brasil or the banking sector's trends."

Cacio said he remains positive on Brazil "and, in particular, its banking industry oriented to consumer credit."

Deutsche Bank analyst Mario Pierry also said in a note to clients on Wednesday that Bendine's appointment doesn't indicate a change in the company's strategic decision.

But the broker did downgrade the bank's shares to hold from buy, saying its concerns are more rooted by the possibility that the government will pressure private banks to cut rates, which could result in lower profit sector-wide.

Thus, "we would rather take a 'wait and see' approach on the stock," said Pierry.