EMERGING MARKETS-Brazil's Bovespa rises as recession feeds election bets

SAO PAULO Fri Aug 29, 2014 2:00pm EDT

SAO PAULO Aug 29 (Reuters) - Brazil's benchmark stock index rose on Friday after data showed the country entered a recession in the first half of the year, boosting expectations that President Dilma Rousseff will lose her bid for re-election in October.

Brazil's Bovespa stock index nearly made up for the previous session's loss and remained on track to close August with its biggest monthly gain since Jan. 2012.

Much of the market's gains have come on the heels of poll data showing declining support for Rousseff, who many investors blame for mismanaging Brazil's economy and state-run enterprises.

Data on Friday showed Brazil's economy shrank over the first two quarters of the year, entering into a technical recession.

"Investors are pricing that Dilma can lose votes with the poor performance from the economy," wrote Itau BBA analysts in a client note on Friday.

The broader MSCI Latin American stock index rose to its highest level in over a year, with the Mexican and Chilean benchmark stock indexes posting modest gains.

In currency markets, the Brazilian real was little-changed against the U.S. dollar. The real has tended to appreciate on negative poll data for Rousseff, as investors expect the country's risk premium to decline under a new administration.

Chile's peso strengthened sharply, adding about 1.25 percent against the dollar, with traders citing bargain-hunting after the currency hit its weakest level in over five years in the previous session. The peso has been weighed down by a decline in the price for copper, the country's main export.

Copper prices were on track for their biggest monthly loss since March on worries that rising tensions in Ukraine could set back global growth and hit metals demand.

Peru's nuevo sol was little-changed after the finance ministry widened its view of the 2014 trade deficit on Friday to more than double its last forecast. (Reporting by Asher Levine in Sao Paulo and Froilan Romero in Santiago; Editing by Chizu Nomiyama)