Latin American Markets Rally on Commodity Surge as Brazil Race Narrows

Latin American stocks and currencies advanced on Tuesday, driven by a surge in commodity prices that lifted risk appetite across the resource-rich region. An index tracking regional equities rose 2% to a record high, while a separate gauge of currencies gained 0.7%, supported by a softer U.S. dollar and attractive yields.

Oil prices climbed to multi-week highs after attacks on Saudi energy facilities by Iran-backed Houthis raised supply concerns. Copper also touched record levels, benefiting major producers in the region.

In Brazil, political developments took center stage. A fresh Nexus poll commissioned by BTG Pactual showed right-wing Senator Flavio Bolsonaro narrowly ahead of left-wing President Luiz Inacio Lula da Silva in a simulated second-round runoff for next month's election. The one-point lead marks the first time Bolsonaro has edged ahead in such a scenario, reflecting a steadily tightening race. First-round voting is scheduled for October 4, with a potential runoff on October 25.

Investors, who view Bolsonaro as more market-friendly, responded positively. The benchmark Bovespa index rose 2.2%, with miner Vale climbing 2.3% and oil major Petrobras gaining 2.6%. The Brazilian real strengthened 1% against the dollar.

"There is still some political risk in Brazil, but it has very high carry and strong commodities," said Lale Akoner, global market strategist at eToro. "Much of the macro drivers are aligning well in terms of boosting these markets right now."

Elsewhere in the region, Chilean consumer prices rose 0.6% in August from the previous month, pushing annual inflation to 4.1% — above the central bank's 2% to 4% target range. Investors awaited a rate decision later in the day, with policymakers widely expected to hold rates at 4.5%. Chilean stocks advanced 0.5% and the peso appreciated 0.9%, buoyed by record copper prices, as Chile is the world's largest copper producer.

Peru, another key copper producer, saw its stock index climb 1.2% on the metal's rally. In Colombia, consumer prices rose 0.39% in August, taking annual inflation to 6.24%, well above the central bank's target range. Equities in Bogota were slightly lower, while the peso remained firm.