Brazil markets to rally as pro-business candidate surges in vote

//Brazil markets to rally as pro-business candidate surges in vote

Brazil markets to rally as pro-business candidate surges in vote

By | 2014-10-06T11:52:49+00:00 October 6th, 2014|World|0 Comments


RIO DE JANEIRO, Oct 6 (Reuters) – Brazilian stocks, currency
and bonds are expected to rally on Monday as a market-favorite
candidate won strong voter support in a first-round of elections
to challenge president Dilma Rousseff, whom investors accuse of
driving Latin America’s largest economy into a recession.

Aecio Neves of the centrist PSDB party made a dramatic late
surge from third place in opinion polls to finish with 33.6
percent of votes in the Sunday elections, trailing Rousseff with
41.6 percent support.

Investors blame Rousseff’s leftist policies, which include
fuel subsidies, an erratic tax policy, and higher government
spending, for failing to keep inflation on target and
discouraging much-needed investment to jumpstart the economy.

Opinion polls showing Rousseff had gained momentum ahead of
the Sunday vote had caused Brazilian stocks to plunge
about 12 percent over the past 30 days, with the real
sinking to its weakest level in nearly six years.

“You had a scenario indicating that Dilma would get nearly
twice as many votes as the second candidate,” noted Mauro
Schneider, chief economist with CGD Securities in Sao Paulo.
“Markets should price in at least a 50 percent chance for an
Aecio victory now.”

In New York, American Depositary Receipts of state-run oil
company Petroleo Brasileiro SA, or Petrobras
jumped 14.5 percent in premarket trade.

After an initial rally, however, markets will likely remain
volatile as investors nervously await new opinion polls to gauge
whether Neves will be able to lure voters from other candidates,
specially Marina Silva, a renowned environmentalist who finished
third in the vote.

Silva on Sunday stopped short of supporting Neves, but many
analysts expect most of her supporters will not shift their vote
to Rousseff.

“A united opposition has, we believe, a slight edge over
President Rousseff in the second round run-off on October 26,”
Tony Volpon, head of emerging market research for Nomura
Securities, wrote in a note to clients.

(Reporting by Walter Brandimarte)

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