Brazil's real and Ibovespa slump after Lula's runoff win, trading halted

Runoff result and market reaction

Luiz Inácio Lula da Silva won the presidential runoff held on Sunday, 25 October, taking 51.79% of the vote against 48.21% for Flávio Bolsonaro, according to LaVanguardia. Markets had favoured Bolsonaro for his liberal economic agenda, so the result surprised investors. Bolsonaro had finished first in the first round, ahead by two points. He has not acknowledged defeat and says he will ask for the result to be annulled. The reaction in financial markets began within hours of the count, with sharp losses in Brazil and abroad on Monday, 26 October.

Stock market halt

The Ibovespa, the main index of the São Paulo exchange and Latin America's principal stock index according to RTBF, fell almost 17% at the Monday opening, as Le Soir reported. ANSA put the drop at 17%. Trading was suspended for 30 minutes before the open. ANSA reported that the automatic interruption mechanism had been triggered for the first time since March 2020, during the coronavirus pandemic. While it was active, purchases and sales of shares, derivatives and private fixed-income securities were halted so the market could stabilise. The exchange's communiqué, cited by RTBF, linked the trigger to a strong fall in the market.

Currency slide and overseas signals

The real lost about 12% against the dollar early in the session, according to LaVanguardia and Le Soir. By 13:10 GMT, RTBF reported, the Brazilian currency had fallen 10.69% to 5.5750 reais per dollar. The dollar opened sharply higher against the real. Before the Brazilian session began, the NEXT FUNDS Ibovespa, an exchange-traded fund run by the Japanese investment bank Nomura, fell 49.3 points, or 15.07%, at the close in Tokyo. That move raised fears of a volatile opening in São Paulo.

Analyst view and the political dispute

RussMOULD_PLACEHOLDER

Luiz Inácio Lula da Silva51.79%

Flávio Bolsonaro48.21%

Luiz Inácio Lula da Silva

51.79 %

Flávio Bolsonaro

48.21 %

Data from the article text

The race had been closely watched by investors because Flávio Bolsonaro was seen as the candidate more favourable to the market. LaVanguardia described the outcome as a comeback from the first round, in which Bolsonaro led. Bolsonaro's refusal to concede adds uncertainty about the result, on top of the market reaction, and his request for annulment has not yet been decided in any source reviewed here.