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Ibovespa Leads Losses Among Biggest Markets After Poll

Brazil's President Dilma Rousseff
Brazil's President Dilma Rousseff. Photographer: Evaristo Sa/AFP via Getty Images

The Ibovespa fell the most among the world’s biggest stock markets as Centrais Eletricas Brasileiras SA drove state-run companies lower after President Dilma Rousseff held her lead in an election poll.

Eletrobras, as the utility is known, and oil producer Petroleo Brasileiro SA fell at least 1.5 percent after an Ibope survey showed Rousseff was 18 percentage points ahead of runner-up Aecio Neves. Lender Banco do Brasil SA retreated 1.6 percent.

The Ibovespa lost 0.9 percent to 54,718.43 at 11:02 a.m. in Sao Paulo, leaving it down 0.2 percent for the week. The real dropped 0.5 percent to 2.2392.

“Petrobras, Eletrobras are shares that basically trade around the prospects of Dilma being re-elected,” Luiz Carvalho, a managing partner at New York-based Tree Capital LLC, said by phone. “If the market was hoping for a continued improvement in the opposition’s stance, that didn’t happen in this poll.”

The Ibovespa index entered a bull market on May 7 as the slowest economic growth of any government since 1992 and above-target inflation eroded Rousseff’s support. Traders bet a change of government would lead to less intervention in state-run companies.

Support for Rousseff ahead of the Oct. 5 election was 39 percent in the Ibope poll published yesterday, up from 38 percent earlier this month. Neves’s support was 21 percent, compared with 22 percent. Rousseff’s lead grew by 2 percentage points, the same as the margin of error in the poll, which was commissioned by the National Industry Confederation and interviewed 2,002 people from June 13 to June 15.

Celebrations, Protests

Near record-low unemployment and increased social welfare spending have helped Rousseff, 66, maintain her lead as the World Cup captures the attention of voters, the Ibope poll showed.

Celebrations have outnumbered protests since the tournament began June 12, as this year’s World Cup has featured an above-average number of goals and upsets such as defending champion Spain’s elimination from the month-long tournament on June 18.

Rousseff’s personal approval rating of 44 percent remains one percentage point below her standing of last June when over 1 million people marched in cities nationwide to protest corruption, rising living costs and the price tag for hosting the World Cup. Her popularity peaked at 79 percent in March 2013.

“The market was expecting support for Rousseff to drop,” Ricardo Pinto Nogueira, the head of operations at brokerage firm Souza Barros, said in a phone interview from Sao Paulo. “Investors think that a different government would take a more technical approach on the management of state-run companies instead of a political one.”

Banco do Brasil

Eletrobras retreated 2.3 percent to 10.61 reais today. Petrobras dropped 1.5 percent 18.72 reais. Banco do Brasil fell to 25.47 reais.

The Ibovespa rose the most among the world’s biggest stock markets on June 6 after a poll showed waning support for Rousseff. Voting shares of Eletrobras surged 9.3 percent to lead the rally, while Petrobras added 8.3 percent in the biggest one-day jump since March 2013. Banco do Brasil, Latin America’s largest bank by assets, gained 5.3 percent.

“The market sees Dilma being re-elected as terrible for Brazil -- there’s no middle ground here, it’s black and white,” Carvalho said. “You can see it in the stocks. If she wins, the market will fall. If she loses, it will rally.”

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