Brazil's Stock Market Plummets Following Lula's Election Victory

Brazil’s stock market experienced a dramatic decline on Monday, losing over $200 billion in value as trading opened after President Luiz Inácio Lula da Silva's unexpected victory over Senator Flávio Bolsonaro in the runoff election. The iShares MSCI Brazil ETF (EWZ), which tracks Brazilian stocks, plummeted by as much as 26%, dropping from a previous close of about $42.60 to a low of $31.40 before recovering slightly to around $32.84 by mid-morning.

The sharp decline in the stock market came as the Brazilian real weakened significantly, with the dollar rising as much as 12% against the currency. The Ibovespa, Brazil's benchmark stock index, fell nearly 17%, reaching around 170,000 points, triggering a trading halt on the B3 exchange for the first time since the pandemic due to the index's 10% drop.

Prior to the election, prediction markets had largely favored Bolsonaro, with Polymarket giving him an 82% chance of winning the day before the vote. Lula, however, secured 51.79% of the votes compared to Bolsonaro's 48.21%, a margin of about 4.4 million votes, defying expectations.

Bolsonaro has since contested the election results, claiming he will seek to annul the election, citing irregularities such as an extension of voting hours that he argues altered the election rules. He stated, "It is impossible to recognize the result of the elections in the context in which these things happened," vowing to utilize his legal team to challenge the outcome.