Brazil puts LatAm equities on track for biggest weekly gain since 2020

BRASILIA: Latin American stocks were set for their biggest weekly gain in nearly six years, buoyed largely by a rally in Brazilian equities earlier this week after polls showed right-wing candidate Senator Flavio Bolsonaro leading the presidential race.

MSCI’s index tracking regional stocks rose 1.2 percent on Friday, while a similar currencies gauge dipped 0.2 percent versus the dollar.

Brazil’s Bovespa index gained 1.1 percent and was set for its steepest weekly rise since April 2020. The real rose 0.8 percent to about 5 per dollar, and was set for its strongest week since October 2022.

Brazilian equities recorded their highest ever daily inflow on Monday, the first trading session following the vote, data from J.P.Morgan showed.

A Datafolha poll released on Thursday showed Bolsonaro with 49 percent of the vote intention in the second round, compared with President Luiz Inacio Lula da Silva’s 45 percent, nearly a week after the first election round. The poll’s margin of error is 2 percentage points.

Meanwhile, annual inflation in Latin America’s largest economy accelerated more than expected in September, rising above the central bank’s target range as price pressures broadened across the economy and food costs returned to growth.

“We expect the Brazilian central bank to remain on hold in the next two meetings… on the back of increased financial volatility during the election period amid persistent services inflation and already unanchored inflation expectations,” said economists at Deutsche Bank.

“However, with the real appreciation after the first-round results and the continued slowdown in economic activity, risks are heavily tilted toward two additional 25bps cuts this year.”

Mexico’s peso weakened for a second straight day, down 1.4 percent, after minutes from its central bank’s latest monetary policy meeting showed three of five governing board members saying interest-rate cuts could be considered if the inflation outlook improves.

The currency was last at 18.43 per dollar, near the November 2025 low it hit earlier this month. It is set for its fifth week of declines, the longest since early 2020.

However, William Jackson, Capital Economics’ chief EM economist, said,” In Mexico, rising inflation combined with the sharp fall in the peso and signs of a revival in the economy could tip the balance at Banxico towards tightening.”

More broadly, some investors took comfort from President Donald Trump saying the US would not strike Iran before midterm elections. Yet, high oil prices and global bond yields remained an overhang.