EMERGING MARKETS-Brazil markets plunge on Rousseff re-election

lunes 27 de octubre de 2014 10:48 GYT
 

(Adds outlook for the real, analyst comment, updates prices)

By Asher Levine and Walter Brandimarte

SAO PAULO/RIO DE JANEIRO Oct 27 (Reuters) - Brazilian financial markets plunged on Monday with stocks falling to their lowest level in nearly seven months, as leftist President Dilma Rousseff's re-election victory dashed investor hopes of significant policy changes over the next four years.

Market sentiment going forward will likely depend on whether Rousseff 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 and tightest 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.

"While Rousseff's victory speech carried a conciliatory tone and invitation for debate and change, her ability to regain credibility will require more than just words," said Flavia Cattan-Naslausky, a strategist with RBS Securities.

Brazilian markets will only stabilize, RBS added, once Rousseff announces "concrete policy initiatives" and appointments to key government positions in the finance ministry and the central bank.

The Bovespa index lost as much as 6.2 percent in early trade but later trimmed losses to about 4.7 percent as bargain hunters swooped in.

The real lost about 2.7 percent to 2.525 per U.S. dollar. Investors bet the Brazilian currency will weaken over the next few years as U.S. Treasury yields rise and Brazil tries to boost industry competitiveness.   Continuación...