Brazilian stocks skyrocketed on Monday as investors saw a higher likelihood of challenger Aecio Neves defeating President Dilma Rousseff in this month's election.

Brazil's Bovespa stock index climbed its most in over three years, while the nation's currency, the real , posted its biggest gain against the U.S. dollar since mid-June.

A survey of voter intentions by pollster Sensus released on Saturday showed Neves with about 58.8 percent support, versus 41.2 percent for Rousseff, ahead of the Oct. 26 runoff vote.

Although recent polls from more widely watched research firms showed the two candidates were running neck and neck, traders seized on the data as a reason to pick up shares of state-run companies such as Petrobras.

Preferred shares of the oil producer formally known as Petroleo Brasileiro SA jumped 10.5 percent. Many investors believe a new administration would enact policies that are more favorable to minority shareholders in the company.

The Rousseff administration currently forces Petrobras to import fuel at world prices and sell it at a loss on the domestic market as a way to tamp down inflation. Investors also cheered a formal endorsement of Neves by

third-placed candidate Marina Silva on Sunday, which should improve his chances of defeating Rousseff.

 "Aecio's campaign is all starting to come together now," said Pedro Arantes, a trader with BGC Liquidez in Sao Paulo. "The big change is that Dilma is no longer the favorite, as she was through this entire election."

Arantes warned, however, that Neves' election is far from a given, and any upcoming election poll that shows him losing ground could cause the Bovespa to plummet.

A widely watched voter poll from research firm Ibope is scheduled to be released on Wednesday after market close. Other traders said Monday's gains were turbocharged by bargain hunting after a sharp drop in Brazilian stocks on

Friday.

Yields on Brazilian interest rate futures: fell across the curve as the real strengthened about 1.5 percent. A Neves win is expected to lower Brazil's risk profile among global investors and increase demand for local assets.

Elsewhere in Latin America, Chile's peso climbed alongside higher prices for copper, the country's main export, while Mexico's peso erased Friday's loss.

Local currencies also received a boost after U.S. Federal Reserve officials on Saturday said the bank could delay an increase in U.S. interest rates if the global economy remains weak enough to warrant it.

Colombia's financial markets were closed for the Columbus Day holiday.

Key Latin American stock indexes and currencies at 2006 GMT:

Stock indexes                    Latest        Daily pct change        YTD pct change                                                  

MSCI Emerging Markets     992.19            0.23                         -1.28 

MSCI LatAm                     3,281.86          3.11                         -0.56 

Brazil Bovespa                  57,996.36        4.85                        12.60 

Mexico IPC                      43,088.67         -0.8                           0.85

Chile IPSA                         3,858.49         0.69                         4.31

Chile IGPA                       18,937.44         0.67                         3.90

Argentina MerVal              10,040.239       -1.6                       86.24

Colombia IGBC                      -                -                             -

Peru IGRA                         15590.98        0.28                       -1.03

Venezuela IBC                    2889.47         2.31                        5.59

Currencies                        Latest         Daily pct change     YTD pct change

Brazil real                         2.3910              0.03                    -1.43

Mexico peso                    13.4312              0.37                   -2.99

Chile peso                          588.5              0.59                  -10.60

Colombia peso                      -                     -                        -

Peru sol                             2.904             0.00                   -3.82

Argentina peso                 8.4650             0.12                  -23.30

(interbank)

Argentina peso                   14.9              -0.47               -32.89

(parallel)