EMERGING MARKETS-Brazil markets plunge on Rousseff re-election
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By Asher Levine and Walter Brandimarte
SAO PAULO/RIO DE JANEIRO Oct 27 (Reuters) - Brazilian financial markets plunged on Monday, with stocks on track for their worst day in more than three years, as the Sunday re-election of President Dilma Rousseff dashed investor hopes of meaningful policy change over the next four years.
Market sentiment going forward will likely depend on whether or not the leftist president signals policy tweaks to boost Brazil's flagging economy, as hinted in a conciliatory first speech she gave after defeating pro-business challenger Aecio Neves on Sunday.
After the most divisive campaign since Brazil returned to democracy three decades ago, Rousseff won 51.6 percent of votes in a runoff against Neves, who won 48.4 percent support.
"Brazil disappointed investors by returning incumbent Dilma Rousseff to the presidential office," Schroders said in a note to clients. "Hopes for reform to address Brazil's structural economic problems have been dimmed, if not dashed."
The Bovespa index lost as much as 6.2 percent in early trade. The index later trimmed losses to about 5.0 percent but remained on track to post its worst single-day performance since the downgrade of the U.S. sovereign rating in August 2008. The real lost about 2.5 percent at 2.52 to the U.S. dollar.
The tight and fast-changing election campaign had sent Brazil's financial markets on a wild ride with big gains whenever Rousseff lost ground in polls and drops whenever her odds looked stronger.
Rousseff's economic policies have been roundly criticized by investors for tipping Brazil into a recession while damaging state-run companies such as oil producer Petroleo Brasileiro SA , known as Petrobras, and lender Banco do Brasil SA along the way. Continuación...