Published Sunday, 25 October, 8:55 p.m. ET · Source: CME Group (Chicago derivatives exchange) and Tokyo Stock Exchange trading, RT market data, Brazil’s electoral court (TSE)
Brazil’s currency and stocks sold off in overseas trading after President Luiz Inácio Lula da Silva’s runoff win, before Brazilian markets reopen on Monday.
Key Facts
—The move. After Lula’s win, dollar futures jumped about 10% and a Tokyo-listed Brazil stock fund fell over 11%.
—The baseline. Friday’s close: dollar about R$4.98; Ibovespa, Brazil’s main stock index, about 205,000 points.
—Caution. Sunday-night trading is thin, and Brazil’s own markets have not yet confirmed the move.
—Next. B3, Brazil’s stock exchange, reopens Monday; the US Federal Reserve decides on rates Wednesday.
Dollar futures traded on the CME, the Chicago derivatives exchange, jumped about 10% against the real on Sunday evening, after Luiz Inácio Lula da Silva beat Flávio Bolsonaro, a senator and son of former president Jair Bolsonaro, in the runoff. A Tokyo-listed exchange-traded fund that tracks the Ibovespa, Brazil’s main stock index, fell more than 11% at the opening of the Monday session in Japan.
The moves matter for anyone holding Brazilian assets, because they came while Brazil’s economy and its currency were closed to local trading. Our runoff results report has the vote count.
What Moved Overnight
The November real contract on the CME fell about 9% in Sunday evening trading, which is the same bet seen from the other side as the dollar’s roughly 10% jump. On Friday the spot dollar closed at about R$4.98, so a real that bought about US$0.20 would buy about US$0.18 at the new level.
In Tokyo, the NEXT Funds Ibovespa Linked ETF dropped more than 11% when trading opened, which is 8 p.m. Sunday on the US East Coast. The Ibovespa itself closed Friday near 205,000 points, according to market data provider RT, and B3 will price it fresh on Monday.
Why Investors Reacted
The same Tokyo fund jumped about 8% after the first round on 4 October, when Flávio Bolsonaro led. On Friday both the real and the Ibovespa rose, so the Sunday reversal came from a higher starting point.
Another Lula term raises the question of how Brazil will handle public spending and debt. Investors who had hoped for a more market-friendly government are repricing, and the first hours of repricing are often the most extreme.
Live Market IntelligenceBrazil — Live Market Board
Rio Times · Live Market Intelligence
Brazil — Live Market Board
-0.75%
167,921.80
-0.75%
69,705.03
-0.12%
10,253.96
-2.76%
92,079
-2.59%
2,490.92
+0.04%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 167,921.80 | -0.75% | +19.56% | 169,186.42 | 178,526 | 175,157 | — |
| USD/BRL | 5.34 | -1.32% | -0.84% | 5.42 | 5.42 | 5.30 | — |
| SELIC | 13.75% | — | — | — | — | — | |
| PETR4 | 53.31 | -1.06% | +77.70% | 53.88 | 53.70 | 52.83 | 43,239,500 |
| VALE3 | 62.88 | -2.33% | +1.98% | 64.38 | 64.43 | 62.80 | 24,652,300 |
| ITUB4 | 41.42 | -0.67% | +11.30% | 41.70 | 42.60 | 41.15 | 28,160,700 |
| BBDC4 | 15.69 | -1.63% | -13.88% | 15.95 | 16.30 | 15.67 | 65,766,400 |
| BBAS3 | 17.59 | +0.69% | -15.59% | 17.47 | 18.31 | 17.51 | 67,844,600 |
| B3SA3 | 15.27 | +1.33% | +21.71% | 15.07 | 15.78 | 15.20 | 75,282,000 |
| ABEV3 | 15.40 | +0.20% | +26.75% | 15.37 | 15.68 | 15.31 | 27,307,400 |
| WEGE3 | 45.78 | +2.81% | +10.06% | 44.53 | 47.08 | 45.06 | 9,823,200 |
| PRIO3 | 69.21 | -2.71% | +87.14% | 71.14 | 70.98 | 69.15 | 6,663,200 |
| SUZB3 | 47.14 | -0.55% | -3.79% | 47.40 | 47.84 | 46.10 | 7,151,800 |
| RENT3 | 31.14 | -1.67% | -20.73% | 31.67 | 32.68 | 31.02 | 19,092,400 |
| AZZA3 | 16.72 | +1.15% | -42.24% | 16.53 | 17.42 | 16.72 | 4,875,400 |
| CSNA3 | 4.76 | -4.99% | -47.09% | 5.01 | 5.14 | 4.76 | 14,327,900 |
| GGBR4 | 24.87 | -2.28% | +36.28% | 25.45 | 26.20 | 24.79 | 7,507,900 |
| ENEV3 | 26.79 | +0.45% | +49.78% | 26.67 | 27.35 | 26.30 | 12,263,000 |
What It Means for US Readers
Dollar-based holders of Brazilian stocks and bonds lose twice when the real falls, once on the asset and once on the currency. US-listed Brazilian names such as Petrobras (oil), Vale (mining), Itaú (banking) and Nubank (digital banking) are expected to open lower when New York trades on Monday, although the size of the move is not yet known.
For US travellers and expats paid in dollars, a weaker real makes Brazil cheaper. For Brazilian importers and anyone with dollar debts, it does the opposite; our dollar-to-real guide and Ibovespa guide explain the mechanics.
What Is Not Known
It is not known whether the move holds once Brazilian markets open, because Sunday-evening futures trade with few buyers and sellers and often overshoot. We have not seen an economic team or budget plan announced, and those signals will decide whether the first reaction fades.
What to Watch This Week
The Getulio Vargas Foundation’s (FGV) Brazil consumer confidence index is due Monday at 7 a.m. ET, the US Federal Reserve announces its rate decision Wednesday at 2 p.m. ET, and the labour ministry’s Caged job-creation figures follow on Thursday. Our week-ahead calendar lists every release.
More: Brazil news, every day from The Rio Times.
Frequently Asked Questions
How far did the real fall after Lula won?
Dollar futures rose about 10% in Sunday-evening trading, so the real lost roughly a tenth of its value. Spot trading in Brazil has not yet reopened.
Why did the Tokyo fund fall more than 11%?
The NEXT Funds Ibovespa Linked ETF is the main Brazil-tracking fund open during Asian hours. It priced the surprise before any Brazilian exchange could.
Sources: CME Group dollar and real futures, Tokyo Stock Exchange (NEXT Funds Ibovespa Linked ETF), RT market data, Brazil’s electoral court (TSE).
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief
Brazil runoff, Sunday, October 25: Brazil runoff: date, poll closing times and when results start. Latest: Brazil runoff polls, Flávio 51%, Lula 49%.