Petrobras, Brazil Stocks Jump On Election Results
Posted 11:38 AM ET
Petrobras and other Brazil stocks jumped early Monday as Brazil's leftist president will face a more conservative rival in a runoff election.
President Dilma Rousseff received nearly 42% of the vote, but she didn't get enough to win outright and will face Aecio Neves in the runoff. Environmentalist Marina Silva came in third, slipping in the final days before Sunday's election.
The state run oil company Petroleo Brasileiro (NYSE:PBR) shares soared 14.4% to 15.98 on the stock market today. Alcoholic beverage maker AmBev S.A. (NYSE:ABEV) shares rose 4.5% to 6.87. Air carrier GOL Linhas (NYSE:GOL) shares rose 8% to 5.42. Aerospace firm Embraer (NYSE:ERJ) shares climbed 3% to 39.31.
Pres. Dilma Rousseff will face business-friendly Aecio Neves in Brazil’s run-off election on Oct. 26. View Enlarged Image
Rousseff is expected to win the Oct. 26 runoff, according to a Datafolha poll but analysts say that companies should be hoping pro-business Neves will prevail.
Under Rousseff, Petrobras was forced to retail its fuel 10% to 15% below international benchmarks, hitting its downstream segment, according to a research note by Raymond James analyst Pavel Molchanov.
Molchanov wrote that a Neves victory would be "the more advantageous outcome" for Petrobras, but not to expect a dramatic rise in fuel prices at the start of his term.
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Now one more thing for you to read:
Brazil election surprise sends ETFs, U.S.-listed shares flying
Reuters
MADRID (MarketWatch)—Surprise news that a dark horse, pro-business candidate will be challenging Brazil’s incumbent president Dilma Rousseff turned into a giant buy signal for investors in stocks and exchange-traded funds linked to the largest South American economy.
Aécio Neves, economist and center-right legislator had been running a distant third a few weeks ago, but pulled ahead in Sunday’s first-round vote. He will face a second-round showdown with Rousseff on Oct. 26.
Shares of ETFs such as Direxion Daily Brazil Bull 3X BRZU, +21.51% and ProShares Ultra MSCI Brazil Capped UBR, +15.88% soared 22% and 16%, respectively, while U.S.-listed shares of Petroleo Brasileiro SA PBR, +13.46% jumped 16%.
Brazil’s real USDBRL, -1.68% soared nearly 3% against the dollar at $2.3872, which was its biggest climb in more than a year. In São Paulo, Brazil’s BovespaBVSP, +5.39% surged nearly 7% at the open. The index is up around 6% so far this year.
Brazil’s presidential vote headed for second round
WSJ's Matthew Cowley explains what's at stake and how third-place candidate Marina Silva could still influence the Brazilian vote.
Neves has deep political roots, and has pledged to tackle structural constraints that are weighing on the country’s economy, something markets would be happy to see. Dilma is widely viewed as uncommitted to economic reforms. A weekly central bank poll showed economists cut forecasts for the country’s 2014 growth to 0.24% from 0.29% previously, Reuters reported Monday.
Why election may end up meaning little for stocks: “Moreover, unlike Ms. Silva, Mr. Neves has the backing of a formidable political machine in the form of the PSDB (Partido da Social Democracia Brasileira) - he would be more likely to be able to push measures through a fractured Congress, and more likely to exert influence over state governments,” said Neil Shearing, Capitol Economics’s chief market economist, in a note Monday.
While momentum remains with Neves, Rousseff is still the second-round favorite, noted Shearing, with recent polls putting her at 48% against 42% for her rival. “If he can tap into rising discontent about cronyism and corruption within the current administration and transform himself into the ‘anyone but Dilma’ candidate, then he could yet prevail,” wrote Shearing.
The likelihood that elections might be a trigger for a much-needed shift in policy that will help transform Brazil’s sagging economy, has at least improved from a few weeks ago, he added.
If Neves wins that second round, said analysts at Danske Bank, then markets will of course love that news. However, investors should remember that the medium-term outlook for that market depends more on global factors than whether or not Rousseff pushes through reforms post-elections if she can manage a win.
“The Brazilian markets have been under significant selling pressure in recent weeks, but we would mostly attribute that to global factors -- fears of Fed tightening, weaker Chinese growth and lower commodity prices -- rather than domestic Brazilian political worries, said analysts in a Danske Bank research note led by Lars Christensen.
| 17.00 | PBR141122P00017000 | 2.73 |  1.12 | 2.69 | 2.71 | 1,487 | 28,350 |
Well, what does this mean for us?
I want you to think of the last election we had for President.
Neves=Romney
Rousseff= Obama
The above states that the stock in question PBR jumped because big business was hopeful that Neves would win the election based on the recent results that he was in second place. This would be a boon to big business, much like if Romeny had have won the last election. Lets look at the above two articles: Rousseff is expected to win the Oct. 26th runoff 48% to Neves's 42%. The second article states that the election will have little meaning for stocks.
I see this as big hopeful business salivating that Neves is gonna win and according to the stats, he's not going to win. For this pic, we went out to November to give this extra time, perhaps even all the way to the runoff in the end of Oct.
I think its a pretty good bet. Rousseff is probably going to win unless she majorly stumbles in her campaign. And I am all about odds.
Oh by the way: that pic I was talking about Friday, DRTX: Don't touch it. Today it was announced that DRTX is going to be bought out and the stock jumped up to the price of acquisition. Based on previous price action, I wanted to wait another day for price candle chart mechanic confirmation and I'm glad that I did. I don't touch acquisitions that are close or have been completed, the market is very efficient about the purchase price being priced into the acquired stock, thus no profit in it. I only concentrate on inefficiencies that I can exploit. For example PBR. Everyone jumped this stock like a loose football today because the crowd is erroneously hopeful that Neves is going to win the election and from where Im sitting, hes not.
That's all for today: Trade to live, people.
Mark
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