Brazilian oil giant Petrobras sinks after Rousseff wins at polls

The Brazilian real is losing 2.1% to hit 2.53 versus the US dollar following the overnight victory by the incumbent candidate Dilma Rousseff in Sunday’s presidential elections in Brazil.

The shares of US-listed Brazilian stocks are sharply lower before the ‘opening bell’ with stock in oil major Petrobras down 18%, iron ore miner Vale off 6% and banks such as Unibanco and Banco Bradesco off by approximately 10% each.

The real could strengthen to 2.35 in six months if Rousseff adopts a more market friendly stance RBC Capital said in a research note. However, should current economic policies be maintained and corruption allegations surrounding state-owned oil major Petrobras grow then the South American giant's currency could drop to as low as 3 per US dollar.

The election results also reverberated throughout the commodity space, with the Bloomberg Commodity Index down by 0.6% after having earlier hit a July 2009 low. Raw sugar and Arabica coffee futures both declined, as Brazil is the main exporter of both products.

A weaker currency might prompt growers to put a greater emphasis on sales abroad, some market watchers said. The Brazilian real has fallen 33% since Rousseff first took office in January 2011 and was earlier trading down by 3.2%, its largest decline since 2011.