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EMERGING MARKETS-Brazilian markets drop as Rousseff's odds improve
October 1, 2014 / 4:48 PM / 3 years ago

EMERGING MARKETS-Brazilian markets drop as Rousseff's odds improve

SAO PAULO, Oct 1 (Reuters) - Brazilian assets declined on
Wednesday as two new polls showed a higher likelihood of
President Dilma Rousseff winning a second term.
    Brazil's Bovespa stock index fell 1.7 percent,
contributing to a nearly 10 percent loss over the past two
weeks, while the Brazilian real sank over 1 percent
against the dollar.
    Rousseff pulled decisively ahead of challengers Marina Silva
and Aecio Neves ahead of Sunday's election, according to polls
released by research firms Datafolha and Ibope late Tuesday.
    Brazilian investors have been heavily critical of the
Rousseff government for policies that have gone against minority
shareholder interests in state-run companies and a tendency to
enact one-time stimulus measures rather than structural reforms
to boost economic growth.
    The Bovespa dropped to its lowest intraday level in almost
three months, weighed down by a 3.4 percent drop in state-run
oil producer Petroleo Brasileiro SA, also known as
    "The crux of the problem is that Brazilian assets remain
vulnerable until when/if there is conviction about regime change
and the necessary policy change to rebalance fiscal, foreign
exchange and monetary policy," wrote Siobhan Morden, head of
Latin America strategy at Jefferies in New York.
    The broader MSCI Latin American stock index 
fell 2 percent to its lowest since late March.
    Chile's IPSA stock index dropped its most in over a
week, one day after data showed the world's top copper producer
posted its biggest monthly drop in manufacturing production in
two years and higher jobless figures. 
    Finance Minister Alberto Arenas said on Wednesday that
Chile's economy should pick up next year, fostered by a 9.8
percent rise in government spending announced by President
Michelle Bachelet late Tuesday.
    In currency markets, Brazil's real was on track for its
weakest close against the dollar since December 2008 as
investors raised their bets on a Rousseff victory. Many see a
second Rousseff mandate worsening Brazil's risk profile and
weakening demand for the real.
    A Reuters poll released Wednesday showed analysts were
divided on the outlook for Brazil's currency due to the
uncertainty over the election and the potential policy changes
it may bring. 
    Elsewhere in Latin America, the Mexican peso looked
set to benefit from a recovery in the U.S. economy, the poll
found, while the Chilean peso could weaken to reflect the
nation's sluggish economy. 
    Chile's currency fluctuated near unchanged on Wednesday,
while Mexico's peso weakened about 0.25 percent.
    Key Latin American stock indexes and currencies at 1617 GMT:
 Stock indexes                        daily %    YTD %
                             Latest    change   change
 MSCI Emerging Markets        997.16    -0.81     0.26
 MSCI LatAm                  3103.09    -2.13    -0.95
 Brazil Bovespa             52931.84    -2.19     2.77
 Mexico IPC                 44793.51    -0.43     4.84
 Chile IPSA                  3905.07    -0.98     5.57
 Chile IGPA                 19087.68    -0.85     4.72
 Argentina MerVal           12075.09    -3.77   123.98
 Colombia IGBC              13570.59    -0.35     3.82
 Peru IGRA                  16084.08    -0.88     2.10
 Venezuela IBC               2907.54    -0.05     6.25
 Currencies                           daily %    YTD %
                                       change   change
 Brazil real                  2.4745    -1.09    -4.76
 Mexico peso                 13.4645    -0.26    -3.23
 Chile peso                    598.2     0.00   -12.05
 Colombia peso               2025.93    -0.05    -4.64
 Peru sol                       2.89     0.00    -3.36
 Argentina peso               8.4400    -0.15   -23.07
 Argentina peso                15.55     1.09   -35.69
 (Reporting by Asher Levine; Editing by Jeffrey Benkoe)

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