Brazil's currency, stocks jump after Bolsonaro scores first-round upset
EWZ•Brazil's benchmark stock index rose more than 8% and the real strengthened more than 4% after Flavio Bolsonaro topped the first round of the presidential election with 47% of the vote, ahead of Luiz Inacio Lula da Silva at about 45%. They will face each other in an October 25 runoff.
1. Markets rally after vote
Brazilian assets rallied after Senator Flavio Bolsonaro outperformed opinion polls to finish first in Sunday's presidential election first round. The Bovespa gained more than 8%, while the real strengthened more than 4% against the U.S. dollar, moving below 5.00 per dollar from around 5.22.
2. Congressional gains
Bolsonaro's Liberal Party emerged as the biggest winner in congressional races. Its representation in the Senate rose from 15 to 28 seats, while it is projected to win 121 seats in the lower house, up from 98. Analysts said a friendlier legislature could make it easier for Bolsonaro, if elected, to advance fiscal reforms.
3. Runoff ahead
Bolsonaro won 47% of votes cast, compared with about 45% for incumbent Lula. J.P. Morgan upgraded Brazilian equities to overweight, citing a more favorable political backdrop. Portfolio manager Thierry Larose said markets were likely to give Bolsonaro the benefit of the doubt, while noting that his fiscal responsibility remained to be seen.
