Markets Plunge After Lula Re-Elected

Overview

• Hours after the Monday result, Brazil-focused ETFs fell steeply in after-hours trade with the iShares Brazil ETF down about 18% and Tokyo’s Ibovespa-linked fund down roughly 12%, signaling heavy international selling.
• Domestic strategists expect a volatile opening for the Ibovespa with many forecasting a drop greater than 5% and the real opening substantially weaker against the dollar.
• Analysts also expect medium- and long-term interest-rate contracts to rise, with some estimates of moves of roughly 60–100 basis points as investors reprice sovereign risk.
• Traders and banks say the market’s sharp turn reflects that a Bolsonaro win had already been priced in, and that confidence will hinge on quick, concrete fiscal signals and the naming of a trusted economic team.
• Broader context shows rising public debt and large interest costs since 2022, which analysts say make fiscal adjustment urgent and could affect borrowing costs, inflation and household living costs if uncertainty persists.