MEXICO CITY
Mexican financial markets surged Monday anticipating something election officials were unwilling to confirm: that fiscally conservative Felipe Calderon has won the presidency.
The nation was on edge waiting for the country's election institute to declare a winner in Sunday's vote, an announcement that could be days away.
But Mexico's stock market, currency and bonds rallied sharply on news that Calderon was leading over his free-spending leftist rival by a seemingly insurmountable 370,000 votes with more than 37 million counted.
"It seems that they're declaring him the winner," said Carlos Gonzalez, an analyst at IXE brokerage in Mexico City, referring to local markets' reaction to Calderon's lead.
Calderon and leftist Andres Manuel Lopez Obrador have both declared victory, but according to results from 97.3 percent of polling places, Calderon had 36.37 percent to Lopez Obrador's 35.40 percent.
The Federal Electoral Institute, however, said the results were in no way final and that it would not declare a winner until an official tally of tens of thousands of ballot boxes that it was not even starting until Wednesday.
But markets did not share the institute's caution.
The Mexico City stock market's IPC index of 35 leading issues was up 3.7 percent, or 709.490 points, to 19,856 in morning trading.
The peso currency, a historic barometer of Mexico's economic fortunes, was at 11.1280 to the dollar, strengthening 2.0 percent from Friday's close at 11.3475.
Reflecting the rally, the yield on the benchmark Mexican 10-year bond fell to 8.77 percent from 9.09 percent.
Investors see Calderon continuing the tight budgets and free-trade friendly policies of outgoing President Vicente Fox, analysts. Both are from the conservative National Action Party.
"The results imply continuity with the current economic program and eliminate the uncertainty that a victory by the leftist candidate implied," Gonzalez said.
Many market players were taken off guard by the results, having anticipated Lopez Obrador -- know popularly by his initials AMLO -- would win the vote, given his slight lead in pre-election opinion polls.
"There was a slight upset because we're not seeing a slight AMLO victory but instead a slight Calderon victory," said Siobhan Morden, Latin America local market strategist at ABN-AMRO in New York.
The local rally took its momentum from an upturn that began last week after the U.S. Federal Reserve raised interest rates as expected while signaling its monetary-tightening cycle may be nearing an end. Global emerging markets had been under pressure over fears the Fed would continue to hike interest rates, further cooling the economy and siphoning off investor cash.
Analyst said they thought that Mexican markets would continue to rally in coming days, unless the vote trend is reversed, or the defeated candidate refuses to accept the result and triggers widespread demonstrations. Lopez Obrador hasn't ruled out street protests.
"Let's see how the loser takes it," said Gerardo Copca, an analyst with Grupo Financiero Monex in Mexico City. "It's most likely the market will continue to rise unless something extraordinary happens."
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