Business · Markets · 4 hrs ago
Brazilian markets plunge after Lula’s re-election victory
Brazilian President Luiz Inácio Lula da Silva won re-election on Sunday, defeating right-wing candidate Flávio Bolsonaro.
On Monday, the real fell about 8.4% against the US dollar, closing at roughly 5.41 reais per dollar, while Brazil’s main stock index dropped 13.88%.
The stock-market fall triggered a temporary trading halt, a safety measure used during sharp swings.
Investors had expected Bolsonaro to win and to pursue tighter control of government spending, so Lula’s victory prompted a reversal in market expectations.
Investors are concerned about public debt and future spending, and higher borrowing costs could make credit more expensive for businesses.
Brazil’s public debt is already more than 82% of its economic output, while pensions and other required spending limit possible savings.
Markets will watch Lula’s choice of finance minister for clues about his plans to manage the budget and debt.
Brazil’s real and stocks fell sharply on October 26 after Luiz Inácio Lula da Silva won re-election as president.
The dollar closed at 5.4066 reais, up 8.36% that day, according to CNN Brasil; Folha reported a rise of 8.41% to 5.409 reais.
Brazil’s Bovespa index fell 13.88% to 176,608.23 points, and trading was temporarily halted.
Investors were concerned that Lula’s fiscal policies might not do enough to control public finances.
The reports differ on the real’s decline: Al Jazeera said it fell 12% in spot trading, while Brazilian outlets reported daily increases in the dollar of about 8.4%.
- Who
- President Luiz Inácio Lula da Silva won re-election. Investors reacted to the result.
- What
- Brazil’s real and stock market fell sharply, while interest-rate futures rose.
- When
- Monday, October 26, after Lula’s victory was confirmed on Sunday, October 25.
- Where
- Brazil.
- Why
- Investors were concerned about future fiscal policy and public spending.
This story does not have two clearly opposing sides.
The Brazilian stock market rose and the real strengthened amid expectations that Flávio Bolsonaro would win and pursue tighter fiscal policy.
Lula’s re-election was confirmed.
The real weakened, the Bovespa fell sharply and trading was temporarily halted.
Interest-rate futures rose as investors reassessed expectations for fiscal policy.
- Dollar close
- 5.4066 reais, up 8.36% on the day, according to CNN Brasil
- Dollar close
- 5.409 reais, up 8.41% on the day, according to Folha
- Bovespa close
- 176,608.23 points, down 13.88%, according to CNN Brasil
- Election winner
- Luiz Inácio Lula da Silva
- Public debt
- More than 82% of GDP, according to Al Jazeera
11 sources
Dólar dispara a R$ 5,40 e tem maior alta diária em 23 anos
Após vitória de Lula, dólar fecha na maior alta diária desde 1999
Com eleição, dólar tem maior alta desde 1999 e Ibovespa despenca 14%
Brazil’s real sinks after Lula’s re-election victory
BörsenTag: Verändert Lulas Wahlsieg auch die langfristigen Marktaussichten?
Braziliaanse beurs onderuit na overwinning linkse Lula: beleggers hadden juist ingezet op winst Bolsonaro
La Bolsa de Brasil se desploma un 14% ante la inesperada victoria de Lula
Brezilya varlıklarında seçim satışı
What people are saying
I’m not surprised the real is sinking sharply; traders are covering their bets that assume a Bolsonaro victory and tighter fiscal policy.
The market pressure is also amplified by the objections raised by Bolsonaro, but the scale of the victory suggests that the result will stand.
Lula’s policies have talked about spending cuts, but he has not gone into the details of how that is going to look.
The mismatch between market expectations and the election result led to a widespread sell-off in the stock market, showing investors’ caution about the country’s future economic and fiscal guidelines.