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SAO PAULO/NEW YORK — Brazil’s currency and stocks had a volatile Monday morning after leftist Luiz Inacio Lula da Silva won Sunday’s presidential election, with investors bracing for a choppy week ahead.

The Brazilian real opened about 2% weaker and hit a one-month low, before rising around 0.8% in early afternoon. The Bovespa stock index sank 2% at opening, rebounded to rise up to 1.3% and was down 0.6% in early afternoon trade.

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Traders said growing hopes of an orderly transition were supporting markets. Defeated President Jair Bolsonaro had not made public remarks more than 17 hours after the race was called. Some of his key allies have recognized publicly that Lula had won the race, easing concerns of contested election results.

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Reach Capital’s director Ricardo Campos said a calm post-election environment brings relief. “There will be no transition problem, even if Bolsonaro reacts badly, most of his allies have already recognized Lula’s victory.”

Fears of more interventionist policies and no support for privatization sank shares of state-controlled companies such as oil company Petrobras, which fell around 8% on Monday morning, while state-run lender Banco do Brasil SA slipped 5.2%.

Xavier Hovasse, head of Emerging Equities at Carmignac, said he prefers to stay away from state-owned companies due to expected higher intervention.

By contrast, education firms including Yudqs and Cogna reacted positively to Lula’s win, along with homebuilder MRV and some consumer firms, which were among the Bovespa’s top gainers. Lula’s Workers Party has a history of policies supporting low-income homebuilders, higher education and consumer spending.

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Hovasse favors companies focused mainly on domestic demand and on growth themes like finance, healthcare, digital economy, and energy.

Analysts at Goldman Sachs said that expectations for continued income support and a potential consumer debt restructuring program among Lula’s policy proposals could be viewed as supportive for domestic consumption.

Patrick Esteruelas, head of global research at Emso Asset Management, sees more investors looking to profit from interest rates differentials, supporting a currency rally.

Investors are closely watching for any indication of Lula’s incoming Cabinet and signs that Bolsonaro will question results, potentially fueling political tension.

Alejandro Arevalo, head of emerging markets debt at Jupiter Asset Management in London, said the big question mark on investors’ minds is the fiscal spending.

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“How do they plan to fund the social spending? Are we going to see some tax reforms, or where is the windfall going to come from to be able to keep the fiscal deficit in check?” Arevalo said.

Lula has been cagey about potential cabinet choices on the campaign trail, but several trusted allies from his Workers Party (PT) are expected to take key posts in the new government on Jan. 1.

“The most important focus for the market will be on Lula’s nominations to Minister of Finance and Budget Planning,” Citi analysts said.

Their report said the most likely outcome is an appointment of a well-known PT politician such as Alexandre Padilha backed by a respected economic team that would be announced closer to Lula’s inauguration.

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PROTESTS

Monday morning saw some highway blockages by truckers protesting the election result, but prominent farm groups have condemened the movement.

Most analysts said they expected any effort by Bolsonaro to challenge the results would be short-lived.

Francisco Levy, chief strategist at Empiricus Investimentos, said a favorable international reaction to Lula may help markets on the short term. Lula was quickly congratulated by the White House and European governments.

The premium demanded by investors to hold Brazil’s hard-currency bonds over safe haven U.S. Treasuries tightened to 264 basis points on Monday from 272 bps on Friday, data from JPMorgan showed.. (Reporting by Tatiana Bautzer, Paula Laier in Sao Paulo and Rodrigo Campos in New York; Additional reporting by Karin Strohecker, Gabriel Araujo, Jamie McGeever and Susan Mathew; Editing by Christian Schmollinger and Marguerita Choy)