Ibovespa Leads World Gains as Real Jumps on Election Poll

Brazilian stocks and the real rose the most among major counterparts as an election poll showed President Dilma Rousseff’s lead narrowed amid slower growth.

The Ibovespa climbed 2.5 percent to 57,012.90 at the close of trading in Sao Paulo as state-run oil producer Petroleo Brasileiro SA jumped to an eight-month high. The real rose 1.4 percent to 2.2262 per U.S. dollar, the most among 31 major currencies tracked by Bloomberg. Swap rates, a projection of interest-rate moves, declined nine basis points, or 0.09 percentage point, to 11.20 percent on the contract maturing in January 2017.

Rousseff would win 44 percent of the vote in a second round against candidate Aecio Neves, who would get 40 percent, according to the July 15-16 poll published last night in newspaper Folha de Sao Paulo’s online edition. The gap of four percentage points falls within the margin of error of plus or minus two percentage points. The previous poll, conducted July 1-2, showed Rousseff winning the runoff with 46 percent against Neves’s 39 percent.

“The poll will be the main driver” for Brazilian markets, Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil in Sao Paulo, wrote by e-mail. “The technical tie between Rousseff and Aecio in the second round is the main positive aspect of this poll.”

The Ibovespa entered a bull market on May 7, surging 20 percent from this year’s low, as Petrobras rallied on speculation a change in government will reduce intervention in state-owned companies.

Petrobras, CSN

Petrobras advanced 4.9 percent to 20.52 reais, while voting shares of Centrais Eletricas Brasileiras SA climbed 6.2 percent to 6.85 reais. Steelmaker Cia. Siderurgica Nacional SA surged 8.2 percent to 11.56 reais, the most in four months, on plans to buy back as many as 64.2 million shares through Aug. 18.

The real pared its weekly decline to 0.2 percent. It has climbed 6.1 percent in 2014, the most among emerging-market currencies.

“The result shows the opposition is getting much stronger,” Joao Paulo de Gracia Correa, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in a telephone interview.

Brazilians returned to work this week after their team suffered back-to-back defeats in the World Cup, facing negative economic news including the slowdown in job creation and a drop in economic activity. Driven mostly by the increased sense of economic malaise, Rousseff’s sliding support will make for a tight second round, Joao Augusto de Castro Neves, Latin America analyst for political consulting firm Eurasia Group, said.

Key Rate

Swap rates on the January 2017 contract were down 26 basis points this week as Brazil’s central bank maintained its target lending rate at 11 percent for a second straight meeting on July 16, signaling it will keep its options open as it weighs weaker economic growth against above-target inflation.

To support the currency and limit import price increases, Brazil sold $198.9 million of foreign-exchange swaps today and rolled over $346.1 million worth of contracts. The central bank plans to keep offering $200 million in swaps each business day at least through the end of the year.

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