With Brazil's presidential election set for October, the contest between President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro has been narrowing in recent polling, and that shift is now showing up in financial markets.
A Quaest poll commissioned by the Brazilian broadcaster Globo found Lula's lead over Bolsonaro, a right leaning senator, continuing to narrow. Brazilians are scheduled to head to the polls in October to choose their next president, and the race is increasingly seen as competitive rather than a foregone conclusion.
Investors have responded to the tightening race. The iShares MSCI Brazil ETF, a widely used proxy for Brazilian stocks traded in the United States, jumped nearly 4 percent in a single session this week, its best day in roughly five months, and was on pace for its third consecutive week of gains. Traders often read strength in Brazilian equities during election season as a signal that markets expect continuity in economic policy or a result they view as market friendly, though it is one data point among many and polls can shift again before voters cast ballots.
Brazil is Latin America's largest economy, and its elections are closely watched well beyond South America because of the country's size, its commodity exports, and its role in regional diplomacy. The vote will be one of several major elections across the world in the coming months that investors and policymakers are tracking for signs of how governments plan to balance growth, inflation, and social spending.
Additional polling and campaign developments are expected in the weeks ahead as the official campaign period moves toward the October vote.
Who are the main candidates in Brazil's election?
Incumbent President Luiz Inácio Lula da Silva and Senator Flávio Bolsonaro are the candidates named in recent polling.
Why are markets reacting to the poll numbers?
Investors often use Brazilian equities as a barometer for how markets are pricing the likely outcome and its effect on economic policy.