EMERGING MARKETS-Brazilian markets drop as Rousseff's odds improve
SAO PAULO, Oct 1 (Reuters) - Brazilian assets declined on Wednesday as two new polls showed a higher likelihood of President Dilma Rousseff winning a second term. Brazil's Bovespa stock index fell 1.7 percent, contributing to a nearly 10 percent loss over the past two weeks, while the Brazilian real sank over 1 percent against the dollar. Rousseff pulled decisively ahead of challengers Marina Silva and Aecio Neves ahead of Sunday's election, according to polls released by research firms Datafolha and Ibope late Tuesday. Brazilian investors have been heavily critical of the Rousseff government for policies that have gone against minority shareholder interests in state-run companies and a tendency to enact one-time stimulus measures rather than structural reforms to boost economic growth. The Bovespa dropped to its lowest intraday level in almost three months, weighed down by a 3.4 percent drop in state-run oil producer Petroleo Brasileiro SA, also known as Petrobras. "The crux of the problem is that Brazilian assets remain vulnerable until when/if there is conviction about regime change and the necessary policy change to rebalance fiscal, foreign exchange and monetary policy," wrote Siobhan Morden, head of Latin America strategy at Jefferies in New York. The broader MSCI Latin American stock index fell 2 percent to its lowest since late March. Chile's IPSA stock index dropped its most in over a week, one day after data showed the world's top copper producer posted its biggest monthly drop in manufacturing production in two years and higher jobless figures. Finance Minister Alberto Arenas said on Wednesday that Chile's economy should pick up next year, fostered by a 9.8 percent rise in government spending announced by President Michelle Bachelet late Tuesday. In currency markets, Brazil's real was on track for its weakest close against the dollar since December 2008 as investors raised their bets on a Rousseff victory. Many see a second Rousseff mandate worsening Brazil's risk profile and weakening demand for the real. A Reuters poll released Wednesday showed analysts were divided on the outlook for Brazil's currency due to the uncertainty over the election and the potential policy changes it may bring. Elsewhere in Latin America, the Mexican peso looked set to benefit from a recovery in the U.S. economy, the poll found, while the Chilean peso could weaken to reflect the nation's sluggish economy. Chile's currency fluctuated near unchanged on Wednesday, while Mexico's peso weakened about 0.25 percent. Key Latin American stock indexes and currencies at 1617 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 997.16 -0.81 0.26 MSCI LatAm 3103.09 -2.13 -0.95 Brazil Bovespa 52931.84 -2.19 2.77 Mexico IPC 44793.51 -0.43 4.84 Chile IPSA 3905.07 -0.98 5.57 Chile IGPA 19087.68 -0.85 4.72 Argentina MerVal 12075.09 -3.77 123.98 Colombia IGBC 13570.59 -0.35 3.82 Peru IGRA 16084.08 -0.88 2.10 Venezuela IBC 2907.54 -0.05 6.25 Currencies daily % YTD % change change Latest Brazil real 2.4745 -1.09 -4.76 Mexico peso 13.4645 -0.26 -3.23 Chile peso 598.2 0.00 -12.05 Colombia peso 2025.93 -0.05 -4.64 Peru sol 2.89 0.00 -3.36 Argentina peso 8.4400 -0.15 -23.07 (interbank) Argentina peso 15.55 1.09 -35.69 (parallel) (Reporting by Asher Levine; Editing by Jeffrey Benkoe)
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