Lula's Upset Re-election Victory Triggers Market Panic, Brazil's Stocks, Currency, and Bonds May Face Selloff, Stock Market at Risk of Circuit Breaker

Odaily reports: Brazilian President Lula won a fourth presidential term with 51.8% of the vote in the second round of the presidential election. The election result came as a surprise to the market, and Brazilian stocks, bonds, and the real exchange rate are facing selling pressure.

Early trading indications showed that perpetual contracts linked to the iShares MSCI Brazil ETF (EWZ) on Hyperliquid fell as much as 27%, while real currency derivative contracts on the Chicago Mercantile Exchange (CME) indicated that the real could weaken to 5.55 per dollar, implying a decline of more than 10% from last Friday's closing level. Brazilian domestic trading institutions warned that selling pressure after the market opens could trigger circuit breaker mechanisms.

Previously, the market widely bet on a Bolsonaro victory, and Brazilian assets rebounded sharply after the first round of voting. Now that the election result has reversed, related trades face liquidation pressure. Analysts noted that the market may reassess Brazil's fiscal outlook, interest rate trajectory, and exchange rate risks in the short term, and that continued escalation of political disputes could further amplify asset volatility. (Bloomberg)