Lula's re-election triggers sharp falls in Brazil's currency and stocks

Summarised from 3 outlets · Updated 26 Oct, 15:14 · Archive

Brazil's currency fell nearly 12 per cent and its stock market dropped 10 per cent after Luiz Inacio Lula da Silva won re-election.

Brazil's currency and stock market experienced sharp falls after left-wing president Luiz Inacio Lula da Silva won re-election on Sunday, securing a historic fourth term in a tight contest. The real dropped nearly 12 per cent against the US dollar when trading began on Monday, whilst the benchmark Bovespa index fell 10 per cent at opening in São Paulo, triggering a circuit breaker that halted trading. An exchange traded fund tracking Brazilian stocks in New York slumped as much as 26 per cent.

Investors had positioned themselves for a victory by right-wing challenger Flavio Bolsonaro, who they viewed as more market-friendly and willing to tackle Brazil's large budget deficit and double-digit interest rates. Lula's win wrongfooted the market. Jerson Zanlorenzi, head of equities and derivatives trading at BTG Pactual in São Paulo, described the result as 'a tsunami that will hit all Brazilian assets'. Jim Reid, head of global macro at Deutsche Bank, said: 'The result wrongfooted a market that had increasingly priced a Bolsonaro victory. Investors had been anticipating a better chance of fiscal consolidation.' Bond yields also rose following the election result.

How it is being reported

• Brazil markets, currency reel from leftist Luiz Inácio Lula da Silva’s election winBrazil’s markets and currency plungedMonday in the aftermath of leftist President Luiz Inácio Lula da Silva's reelection victory, prompting a temporary halt in trading in the South American country.New York Post · 26 Oct, 15:57
• Brazil election 'tsunami' sends currency and stock market tumblingThe Brazilian currency and stock market tumbled as the surprise re-election of Left-wing president Luiz Inacio Lula da Silva sparked panic among investors.This is Money · 26 Oct, 14:57
• Brazil’s markets set to tumble as investors bet Lula will add to fiscal painInvestors had been positioned for victory by rightwing Bolsonaro, seen as more willing to tackle budget deficitFinancial Times · 26 Oct, 11:41

In this story: Luiz Inacio Lula da Silva · Flavio Bolsonaro · Brazil · Deutsche Bank · BTG Pactual

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