Brazil's real jumps 3.5% as Bolsonaro's strong showing spurs policy cheer



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Brazil's real set for best session since Oct 2018

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Colombia's peso jumps more than 1% as oil rallies

By Susan Mathew

Oct 3 (Reuters) - Brazil's real jumped 3.5% on Monday and stocks were on course for their best session since December as investors cheered far-right President Jair Bolsonaro's stronger-than-expected showing in the first round of a presidential election.

Most other regional stocks .MILA00000PUS and currencies .MILA00000CUS also rallied, as U.S. stocks jumped and the dollar steadied.

As OPEC+ considered its biggest output cut since 2020, crude prices surged more than 5%, lifting currencies of exporters such as Mexico MXN= and Colombia COP= , with the latter moving 1.3% away from near three-month lows.

Sentiment had been hit earlier in the day as dismal factory activity data from around the globe heightened worries about economic growth. Risk assets have been hammered this year as major central banks tighten policy to curb surging inflation but at the risk of tipping economies into recession.

Latam gains helped broader EM indexes .MSCIEF .MIEM00000CUS cut a majority of their session losses, as did gains in South African ZAR= .JTOPI and Turkish assets .XU100 .

ELECTION ZEAL

Brazilian markets rallied after Bolsonaro's leftist challenger, former President Luiz Inacio Lula da Silva, fell short of clinching victory in a first round of voting on Sunday.

Lula's advantage of 5 percentage points was tighter than most polls had shown and, along with a strong showing for the right in Congress, set the stage for a highly competitive and tense second round on Oct. 30.

"Such a run-off reassures the market that market-leaning policies tend to be more likely," said Mauricio Une and Renan Alves, strategists with Rabobank.

Brazil's foreign currency bond spreads over U.S. Treasuries narrowed 17 basis points to 282 bps.

The real BRBY BRL= looked to log its biggest one-day jump in more than four years and the main stock index .BVSP surged 4.0%, also lifted by an 8.5% in privatization candidate Petrobras PETR4.SA .

"We expect Lula to announce at least part of his economic team and present a draft of his economic proposal (during the campaign)," said Elizabeth Johnson, MD Brazil research at TS Lombard.

"Although he is unlikely to name a Finance Minister ahead of the second round, we expect him to announce a market-friendly team, which could include former Banco Central President and Finance Minister Henrique Meirelles. This could further support Brazilian assets."

Elsewhere, Hungary's forint HURHUF= hit record lows against the euro on worries over EU funds and Europe's energy crisis hitting hard and after the central bank signalled the end of sharp interest rate hikes.

Key Latin American stock indexes and currencies: Stock indexes

Latest

Daily % change MSCI Emerging Markets

874.78

-0.12 .MSCIEF

MSCI LatAm

2177.81

6 .MILA00000PUS

Brazil Bovespa

114452.38

4.01 .BVSP

Mexico IPC

44978.74

0.79 .MXX

Chile IPSA

5121.44

0.14 .SPIPSA

Argentina MerVal

143180.92

2.923 .MERV

Colombia COLCAP

1143.60

1.36 .COLCAP

Currencies

Latest

Daily % change Brazil real

5.2097

3.53 BRBY

Mexico peso

19.9820

0.79 MXN=D2

Chile peso

956.9

1.05 CLP=CL

Colombia peso COP=

4549.68

1.20 Peru sol

3.982

-0.18 PEN=PE

Argentina peso

148.2200

-0.61 (interbank) ARS=RASL

Argentina peso

283

1.77 (parallel) ARSB=


Reporting by Susan Mathew in Bengaluru; Editing by Kirsten Donovan

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