Brazil’s real led global gains and stocks rallied as traders bet that a change in government may be closer than ever after months of political gridlock that has prevented lawmakers from focusing on kick-starting the stalled economy and closing a crippling budget gap.
The rally was triggered by news that the federal police had raided the house of former President Luiz Inacio Lula da Silva, fueling speculation that support will grow to impeach his mentee and successor, President Dilma Rousseff. While markets have been split in the past about whether a Rousseff ouster would be good or bad, many now say it may be the only way out of the political quagmire.
“The government is so weak that any change is positive,” said Joao Paulo de Gracia, an analyst at SLW Corretora de Valores in Curitiba, Brazil. “There’s a chance that Dilma won’t finish her term.”