Brazilian Market Bets on Bolsonaro and Improves Regional Outlook for Argentina
The result of Brazil's first-round presidential election generated a positive reaction among international investors. The ETF that tracks Brazilian assets advanced 8% in trading following the election, despite Flavio Bolsonaro failing to secure the majority needed to avoid a runoff. Shares of Petrobras, meanwhile, rose 4%.
The Liberal Party senator finished ahead of President Luiz Inácio Lula da Silva and both will compete again in three weeks. The market response reflected expectations of a government change and the perception that Bolsonaro retains chances for the second round, although the electoral outcome remains uncertain.
Brazil's developments are closely watched in Argentina for their potential impact on access to financing and debt. This is compounded by the trajectory of U.S. Treasury bonds with ten-year maturity, whose yield rose again and stood around 5.28%, in an international environment unfavorable for emerging markets.
On the local front, consulting firms identified mixed signals. The Central Bank purchased USD 566 million during September, of which USD 323 million entered in the final three days of the month. Greater flows are also expected from issuances of Negotiable Obligations, provincial bonds and dollar-denominated loans, in addition to higher harvest liquidation and an expected improvement in the wheat market.
Activity showed a rebound in August, with stronger performance in manufacturing and commerce, and initial September data pointed to continued recovery. Lower inflation, a modest improvement in real wages, increased consumer confidence and automobile sales provided positive signals, although credit has yet to provide sustained economic momentum.
During Argentina Week in Paris, the Government announced investments worth approximately USD 27 billion, primarily in energy and mining. However, the country risk closed the week at 650 basis points, while the rise in U.S. rates and dollar strength maintained pressure on Argentina and other emerging markets.