Brazil markets rally on election result

Brazilians stocks soared on Monday after the pro-business candidate Aecio Neves confounded pollsters with a surprisingly strong performance in the first round of the country's presidential elections.

The Ibovespa, the benchmark index of Latin America's largest market, surged more than 7 per cent in early trade and was up 6.05 per cent at 57,838 points by mid-morning. The rise was led by Petrobras, the state-run oil company that has been hurt by price controls by the current government, with a 17 per cent increase to R$21.43.

The Brazilian real appreciated 1.74 per cent against the dollar to R$2.4156. The cost of insuring Brazilian bonds against a default also fell sharply, dropping 20.87 basis points to 155.30.

With 99.99 per cent of the vote counted, incumbent president Dilma Rousseff won with 41.59 per cent of the vote against 33.55 per cent for Mr Neves and 21.32 per cent for one-time poll leader, environmentalist Marina Silva.

Ms Rousseff's margin was half the 16 percentage point lead predicted by poll group Ibope in news that will encourage investors, who view her Workers' party government as interventionist.

"The market is going to be excited with this change in the electoral scenario," said Andre Guilherme Pereira Perfeito of brokerage Gradual Investimentos in Sao Paulo, although he added that he still viewed Ms Rousseff as the favourite.

This year's election has been one of the most unpredictable in years in a country in which the electoral process has traditionally been dominated by the centre-left PT and centrist PSDB.

Ms Silva threatened to overturn this duopoly in August when she was thrust into the candidacy of the minority Brazilian Socialist party after the death of her running mate Eduardo Campos in an aircraft crash.

She rode a sympathy vote and attracted people tired of the status quo and frustrated with poor public services and corruption as highlighted by mass protests last year against expenditure on the 2014 football World Cup.

But her support collapsed over the past week as the PT unleashed a slick negative campaign painting her as a friend of bankers in a country with among the world's highest interest rates.

A jubilant Ms Rousseff wasted no time on Sunday night in continuing her offensive, this time against Mr Neves, saying that Brazilians would reject the "phantoms of the past" when they voted in the second round on October 26.

She backed up the comments, a reference to the PSDB that ruled Brazil between 1995 and 2002, by painting the party as representative of the elite or only "one-third" of Brazilians.

"The Brazilian people cannot go back to . . . those who broke this country three times," she told supporters.

Mr Neves in his speech immediately opened the door for alliances, particularly with Ms Silva.

Praising the late Mr Campos and Ms Silva, he said he had "enormous respect" for the former senator but that he had received "no contact" yet with other politicians looking to support his campaign.

"Let's wait for these next few days so that these issues can be defined," he said.

Following the final results, Ms Silva, a former illiterate rubber tapper who projects an image of integrity, suggested she would offer her support to whichever candidate adopted a significant part of her proposed programme for government.

"I have taken on a commitment to bring about change," she told crowds of cheering supporters in an upbeat event in Sao Paulo on Sunday night.

"We would have liked to have been in the second round but we will be in another way, with our programme," she said, adding that her party would conduct a series of meetings over the next few days.

Ms Silva disappointed many by remaining neutral in the second round of the 2010 elections after running for president for the Green party.

However, she said the "trend" was for her to see through the commitment she made the moment she decided to run for the PSB party in the wake of Mr Campos's death.

But analysts are unsure how much of the support base of Ms Silva can be transferred to the PSDB.

Some believe the anti-Rousseff swing vote that had initially flocked to her had already transferred itself to Mr Neves last week after support for Ms Silva collapsed in the polls.

The voters who stayed with her were more likely to be left-leaning and would go to the PT in the second round, analysts said.

"We have to see how much of Marina's votes will go to him," said Joao Augusto de Castro Neves, analyst with Eurasia Group, of Aecio Neves. "I'm sceptical."

In an example of how fickle voters can be, Francisco Santos, a popcorn seller outside a polling station in the port city of Santos near Sao Paulo, said he had voted for Ms Rousseff.

"I've always voted for the PT for president," he said. But he added he had voted for Geraldo Alckmin for the governor of Sao Paulo, even though the politician is a PSDB stalwart.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation