SAO PAULO, Sept 21: Brazil’s battered financial markets got a reprieve on Friday after a fresh opinion poll gave investors hope that Luiz Inacio Lula da Silva may not win the presidency in the first round vote on Oct. 6.

The survey by pollsters Ibope showed front-runner Luiz Inacio Lula da Silva of the left-wing Workers’ Party falling 2 percentage points to 39 per cent of voters’ support, lowering his chances of taking the election in the first round.

And while market favorite Jose Serra, the candidate backed by the governing coalition, held steady at 19 per cent, investors said the former health minister’s chances of forcing a run-off ballot with Lula on Oct. 27 were improving.

After slumping early, the country’s currency, the real reversed course on the back of the poll news, putting an end to a six-session losing streak. The real rose 1.3 per cent to 3.405 per dollar, leaving the currency 7.2 per cent below where it started the week and 31 per cent weaker year-to-date.

Stocks also rallied in the wake of the poll, while getting an additional lift from gains on Wall Street, traders said. The Sao Paulo Stock Exchange’s benchmark Bovespa index jumped 2.27 per cent to 9,585.48 points, closing on the upside for the first time this week.

The Bovespa got a boost in trading volume from a share swap between paper and pulp companies Suzano and Bahia Sul. Final turnover was 1.4 billion reais, more than twice the amount in recent sessions.

Among the day’s most active stocks was state-owned oil giant Petroleo Brasileiro, or Petrobras, whose shares rose 2.6 per cent to 43.70 reais in heavy trade.

Market bellwether Tele Norte Leste Participacoes, or Telemar, climbed 3.6 per cent to 24.30 reais, posting its first gain since Sept. 11.

Telemar shares account for about 13.5 per cent of the Bovespa index.

The day’s biggest gainer was telephone giant Embratel Participacoes, whose shares soared 7.4 per cent to 2.47 reais. On Thursday the long-distance carrier’s stock price surged 3.14 per cent as investors shrugged off media reports suggesting Embratel’s balance sheet may have contributed to the collapse of its parent company, WorldCom Inc.

Prior to the release of the Ibope survey on Friday, investment bank Bear Stearns said it was downgrading Brazil to “underweight,” citing increased risk due to Lula’s recent rise in the polls.

Given Lula’s rise, investors should treat Brazil as if the burden of proof is on it to demonstrate that if Lula is elected, crucial pro-growth structural reforms will be effected, Bear Stearns said in a research note.

Investors have pummeled Brazil’s financial markets in recent months, fearing that a Lula victory could mean the country may face difficulties servicing its hefty $260 billion public debt.

In other news, Brazil’s Central Bank said on Friday it would no longer attempt to roll over $1.5 billion in dollar-linked debt coming dues on Sept. 25, meaning it will instead buy back the securities.

The announcement came after the bank opted against rolling over about $600 million in short-term notes in an auction, citing high interest rates demanded by election-wary investors.—Reuters