Brazil's benchmark stock index, the Ibovespa, rose 3% on Wednesday (Sept 2), and the dollar closed sharply lower, at 5.10 reais. Anyone holding 1,000 reais in a fund that tracks the index saw the balance grow by roughly 30 reais in a single session. The driver was political: a poll released that day put President Lula and Senator Flavio Bolsonaro in a statistical tie, within the margin of error, in a likely runoff.
According to news site g1, the Quaest survey, commissioned by broadcaster Globo and newspaper O Globo, shows Lula with 37% of voter intentions in the first round, slightly more than one voter in three, against 29% for Flavio Bolsonaro. Writer Augusto Cury ranks third with 10%. In a simulated runoff, Lula has 42% against Bolsonaro's 41%, a statistical tie because the margin of error is two percentage points; the gap was three points in mid-August.
It was the Ibovespa's 11th straight gain, closing at its highest level since May, as state news agency Agencia Brasil reported. CNN Brasil put the rise at 3% and Bloomberg Linea at 3.1%. The dollar fell 0.91%, to 5.10 reais, nearly 5 centavos lower.
In everyday terms, a drop of nearly 5 centavos saves about 47 reais on a 1,000-dollar purchase, the size of a typical travel budget. Among stocks, state-controlled Banco do Brasil rose almost 6%, lifted by the poll and by a new payout of JCP (juros sobre capital proprio, a Brazilian dividend-like distribution of profits to shareholders), according to InfoMoney.
Why a poll moves prices
In brief: Brazilian markets use the term "electoral trade" for buying and selling driven by each candidate's chances of winning October's election. When a survey shows a tighter race, investors pay more for shares of companies seen as benefiting from a change of government and step back from assets tied to the current one. Because the outcome is unknown, the bet can reverse within days if the next poll tells a different story.
The financial daily Valor Economico described "euphoria" on the exchange, with traders betting on a change of power, but noted the market is not yet pricing a 50/50 election. The newspaper Estadao says new polls, including Datafolha, will test the strength of the so-called electoral trade on Thursday (Sept 3). The first round of voting is about a month away, according to g1.