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Mexican peso, stocks tumble on fears of ruling coalition super-majority in Congress

Mexican stocks fell over 6%on Monday and the peso closed at its weakest to the dollar since November after the country’s ruling party scored asurprisingly strong election result and looked poised for asuper-majority in Congress that markets fear might bring constitutional change and diminish checks and balances.

Claudia Sheinbaum won alandslide victory in Sunday’s presidential election,as had been widely expected.But the scale of the gains for the Morena party and its allies took markets by surprise,with some fearing the results would pave the way for the ruling coalition to pass constitutional reforms without opposition support.

A two-thirds super-majority in both chambers of Congress is still in the cards for Morena,which also won the mayoral race in Mexico City by adouble-digit margin.

The Mexican peso earlier hit afresh seven-week low of 17.754 to the dollar,a 4.29%drop,LSEG data showed.It ended the session down 3.8%at 17.671 per dollar,its weakest daily close since November.

“The question is whether the Morena party has done so well that it could command asuper-majority and try to pursue market non-friendly policies of constitutional reform,”said Chris Turner,global head of markets at ING.

The latest losses mean the peso has weakened more than 4%since the start of 2024,a sharp turnaround for the currency,which was,until recently,one of the few in emerging markets to have gained ground against astrong dollar this year.