EMERGING MARKETS-Bovespa rallies, yield curve inverts on election bets

Wed Aug 27, 2014 5:26pm EDT

(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)
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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