Brazil Markets Plunge After Lula Re‑Election

Overview

• The Ibovespa fell 18.12% over the week and closed Friday at 167,921.80 points, marking the index’s fifth worst weekly drop since 1994.
• The US dollar gained about 9% for the week, its largest weekly rise since 2008, trading near R$5.44 at Friday’s close.
• Extreme intraday volatility followed the vote when a circuit breaker halted trading on the first post‑election session and B3 data show nearly R$7.6 billion in net foreign equity outflows in the first three trading days.
• Market participants say the sell‑off was driven by a rapid reassessment of fiscal risk after the election and analysts warn that a weaker real and higher long‑term rates could raise borrowing costs, curb investment, and add roughly 0.3–0.8 percentage points to 2027 inflation unless a credible fiscal adjustment is presented.
• Investors will be watching announcements of the incoming government’s economic team, any concrete fiscal measures, and global rate and equity moves for signs that risk premia on Brazilian assets can ease.