Analysts Forecast Brazil Market Plunge After Lula Turnaround Win
The circuit breaker paused shares for 30 minutes as investors reversed bets on a more market-friendly government and the real fell nearly 12%.
- Following the re-election of President Luiz Inacio Lula da Silva, Brazilian stocks and the real currency slumped, with the Bovespa index falling 10 per cent and triggering the market's circuit breaker mechanism.
- This selloff reverses the rally seen earlier this month when markets soared on expectations of a win for President Jair Bolsonaro, whom prediction markets like Kalshi had priced at more than 75 per cent chance on Friday.
- Brazil's sovereign debt also plummeted, with the 2056 maturity down around 2.5 cents, while prices of raw sugar slid nearly 5 per cent and five-year credit default swaps jumped to 151.67 basis points.
- Investors are seeking a credible commitment to fiscal discipline, said Alejo Czerwonko, chief investment officer for emerging markets at UBS Global Wealth Management, noting the prior rally is expected to be largely priced out.
- Attention now turns to Lula's choice of finance minister in coming weeks to signal the administration's fiscal approach, as the team aims for a budget surplus of about 1.3 per cent of gross domestic product by 2030.
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121 Articles
Reformatorisch Dagblad
The Brazilian stock market plummeted on Monday following the unexpected election victory of left-wing President Luiz Inácio Lula da Silva. In recent weeks, investors had been counting on more government budgetary discipline in the event of a victory by the far-right Flávio Bolsonaro. After Bolsonaro’s win in the first round, stock prices rose sharply.
Dollars rise by more than 12% and future interest shoots with market frustrated by the defeat of Flávio Bolsonaro. Risk-Brazil index recorded a rise of 27%, signaling a greater distrust of investors.
The São Paulo Stock Exchange, the main one in Latin America, collapsed almost 17% in its opening this Monday after the historic reelection on Sunday of the leftist president Luiz Inácio Lula da Silva against the conservative Flávio Bolsonaro.At almost 81 years old, Lula won the elections with about 52% of the votes against 48% of Senator Bolsonaro, who had won the first round and arrived as a favorite.The sharp fall of the reference index Iboves…
Brazil's stock exchange stopped trading 30 minutes after the Ipovispa index fell 10%, reals declined about 12% to the dollar, and crude sugar prices fell 4.2% amid investors' fears about President Luis Inacio's fiscal policy.
The sharp drop in the Ibovespa index caused even a 30-minute suspension of transactions
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