Flávio in pole position

The strong showing for Flávio Bolsonaro in the first round of Brazil’s presidential election has boosted Brazilian assets this week. Most of the good news now appears to be priced into the FX and equity market, although there may be scope for further falls in local currency bond yields - but this will partly hinge on a credible fiscal plan. Elsewhere, the broad-based rise in inflation in September will make for uncomfortable reading for many of the region's central banks, and we think strengthens the case for hikes in Peru and Mexico.