EMERGING MARKETS-Bovespa rallies, yield curve inverts on election bets
(Adds Brazilian yield curve inverting) SAO PAULO, Aug 27 (Reuters) - Brazil's Bovespa stock index rose to its highest in 19 months on Wednesday after polls showed President Dilma Rousseff might lose her re-election bid in October, while the yield curve on benchmark interest-rate contracts inverted on bets the next president will be tougher on inflation. The broader MSCI Latin American stock index rose to its highest level in over two weeks, while regional currencies were mixed. A widely watched poll released on Wednesday showed Rousseff losing to environmentalist Marina Silva in an expected runoff, echoing the results of another poll released late on Tuesday. Many investors have accused Rousseff of mismanaging the economy and criticized her for enacting policies detrimental to minority shareholders of state-run companies such as oil producer Petroleo Brasileiro SA, known as Petrobras. Petrobras preferred shares rose 4.6 percent and are up about 22.5 percent over the past nine sessions as Rousseff's chances continued to dim. The index was also boosted by telecommunications companies Grupo Oi SA and TIM Participacoes SA. Their shares soared after Grupo Oi announced it hired investment bank Grupo BTG Pactual SA to advise on a plan to win control of TIM. In a rare development, the yield curve inverted as investors bet the country's next president will initially impose a tighter fiscal policy to rein in inflation, making room for lower interest rates in the future. Yields paid on interest-rate contracts maturing in January 2021 sank 16 basis points to 11.22 percent, less than the 11.3 percent paid on contracts maturing in January 2017 , or the 11.29 percent paid on contracts that expire in January 2016. In currency markets, the Brazilian real strengthened against the dollar for a second straight day, as traders saw a non-Rousseff government reducing the country's risk profile. Chile's peso fell for the second straight session, partly because of lower copper prices, the country's main export. Chile's central bank is expected to continue easing next month, cutting the benchmark interest rate 25 basis points to 3.25 percent, according to the prevailing view of traders in a central bank poll published on Wednesday. The Mexican peso strengthened slightly against the dollar after data showed a rebound in Mexican factory exports in July, raising hopes for a strengthening recovery in Latin America's second-largest economy. Key Latin American stock indexes and currencies at 2040 GMT: Stock indexes Latest Daily pct YTD pct change change MSCI Emerging 1,093.74 0.55 9.08 Markets MSCI LatAm 3,625.24 1.57 13.26 Brazil Bovespa 60,950.57 1.89 18.33 Mexico IPC 45,601 0.3 6.73 Chile IPSA 3,973.31 0.55 7.41 Chile IGPA 19,334.22 0.53 6.07 Argentina MerVal 9,811.97 3.04 82.01 Colombia IGBC 14,567.98 0.8 11.45 Peru IGRA 17,026.95 0.5 8.08 Venezuela IBC 2,596.75 2.47 -5.11 Currencies Latest Daily pct YTD pct change change Brazil real 2.2449 0.83 4.98 Mexico peso 13.0837 0.10 -0.41 Chile peso 590 -0.68 -10.83 Colombia peso 1929.5 0.13 0.13 Peru sol 2.847 -0.39 -1.90 Argentina peso 8.4000 0.06 -22.71 (interbank) Argentina peso 14.33 -0.91 -30.22 (parallel) (Reporting by Bruno Federowski, writing and additional reporting by Asher Levine.; Editing by Jonathan Oatis and Andre Grenon)
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