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Ibovespa Leads Losses as Real Slips After Campos’s Death

By Filipe Pacheco, Julia Leite and Ney Hayashi
August 13, 2014 5:28 PM EDT 126 Comments
Eduardo Campos, presidential candidate and former governor of the state of Pernambuco, during an interview in Sao Paulo on April, 17, 2014.
Photographer: Paulo Fridman/Bloomberg
Eduardo Campos, presidential candidate and former governor of the state of Pernambuco, during an interview in Sao Paulo on April, 17, 2014.

The Ibovespa led world losses amid a surge in volume that whipsawed trading after presidential candidate Eduardo Campos died in a plane crash. The real slid.

He was in a plane built to hold nine passengers that crashed in Sao Paulo state today following an aborted landing because of bad weather, the air force said in a statement. Campos, who was polling in third place ahead of the October elections, was flying to an event in the city of Guaruja at the time, according to O Estado de S. Paulo newspaper.

Related: Brazil Presidential Candidate Campos Reported Dead in Crash

Stocks and the real plunged initially before paring losses as investors sought to quickly analyze the impact the crash would have on Brazil’s presidential vote. The equity gauge had rallied 26 percent from this year’s low through yesterday on bets President Dilma Rousseff would be defeated and the new government would reduce intervention in state-owned companies.

“Elections are the main driver for the market now, but without Campos, uncertainty increases,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said by phone from Rio de Janeiro. “The market will only find a direction once new polls become available.”

Campos, 49, the former governor of Pernambuco state, was traveling from Rio de Janeiro when the crash occurred at about 10 a.m. local time. The plane crashed on a gym, according to a spokesman for the fire department.

Opinion Poll

A poll by public opinion research company Ibope, released Aug. 7, showed support for Rousseff before the Oct. 5 election unchanged at 38 percent. Campos would win 9 percent of votes in the first round of elections, the poll showed.

The benchmark Ibovespa equity gauge dropped 1.5 percent to 55,581.19 at the close of trading in Sao Paulo, after sinking as much as 2.1 percent. It was the worst performance among the world’s major benchmarks. Trading volume was 13.44 billion reais, double the daily average of the past year, according to data compiled by Bloomberg. The gauge’s options traded on the Sao Paulo exchange expired today.

State-run oil producer Petroleo Brasileiro SA, known as Petrobras, sank 5 percent to 18.69 reais. The real dropped 0.2 percent to 2.2816 per dollar.

Swap rates, a gauge of expectations for interest-rate moves, jumped 11 basis points, or 0.11 percentage point, to 11.68 percent on contracts maturing in January 2017.

“The market is reacting amid a mix of cautiousness and nervousness,” Silvio Campos Neto, an economist at Tendencias Consultoria Integrada, said in a telephone interview.

Street Protests

Campos made his debut in politics at age 21, when he campaigned for Miguel Arraes, his grandfather and former Pernambuco governor. As a legislator in Congress he successfully pushed a bill that cut pension benefits and, as President Luiz Inacio Lula da Silva’s science minister, a measure that allowed stem cell research.

Campos quit Rousseff’s governing coalition in September in the aftermath of street protests that pushed the government’s popularity to record lows. He surprised political leaders and analysts by announcing an alliance with former Environment Minister Marina Silva, who placed third in the 2010 presidential race and has strong support among young, urban voters. Silva received 19 percent of the votes in the first round that year, and didn’t support anyone in the runoff.

“I think Marina will be the candidate now, and she’s a strong candidate, stronger even than Campos was because she’s more well known,” Luiz Carvalho, a managing partner at New York-based Tree Capital LLC, said by phone. “I think she’ll have a large appeal with the lower classes, and her voting intentions will be considerable. Dilma’s situation for a second round is now worse.”

To contact the reporters on this story: Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net; Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Rita Nazareth

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