Why it matters
- The Ibovespa had its biggest one-day gain in more than six years, Trading Economics said, and closed at a record.
- Investors see Flávio Bolsonaro as more fiscally conservative than President Lula, so his first-round lead lifted stocks and the real.
- The two candidates meet in a runoff on Oct. 25, so the election is not settled and prices could swing again.
Brazil's benchmark Ibovespa stock index surged 7.7% to a record 206,912 on Monday, Oct. 5, after senator Flávio Bolsonaro finished ahead of President Luiz Inácio Lula da Silva in Sunday's first round of the presidential election, Trading Economics reported. It was the index's biggest one-day gain in more than six years.
The Brazilian real also strengthened sharply, moving below 5 reais per U.S. dollar.
What happened in Brazil's election?
Flávio Bolsonaro, the son of former president Jair Bolsonaro, won 47.03% of the vote on Sunday, Oct. 4. Lula received 45.16%, Euronews reported. Neither candidate reached the 50% needed to win outright, so the two will face each other in a runoff on Oct. 25.
The result was a surprise. Polls had shown Lula ahead, according to Latin Times.
Why did Brazilian stocks jump?
Investors see Bolsonaro as more fiscally restrictive than Lula, Trading Economics said. Euronews reported that his platform includes scrapping taxes, measures to rein in public debt and the privatization of dozens of state-owned companies.
The Ibovespa crossed 200,000 points for the first time in its history on Monday, Latin Times reported. It closed up 14,797 points, according to Trading Economics. The session set a record for trading activity, with more than 5 million trades.
Banks and the exchange operator led
Financial stocks posted the biggest gains, Trading Economics reported.
| Company | Move on Monday |
|---|---|
| B3 (stock exchange operator) | +22.6% |
| Bradesco | +13.6% |
| Sabesp | +11.6% |
| Banco do Brasil | +11% |
| Itaú | +10.4% |
| Petrobras | +8.2% |
Source: Trading Economics, São Paulo trading.
In New York, U.S.-listed shares of the digital bank Nu Holdings rose 13.03%, and Petrobras's U.S. shares gained more than 13%, Yahoo Finance reported.
What happened to the Brazilian real?
The real traded at 4.98 per dollar on Monday, compared with 5.22 at Friday's close, Euronews reported. Trading Economics said the currency strengthened to below 5.00 per dollar, a 17-month high.
What comes next
BTG Pactual, Latin America's largest investment bank, estimates that a Bolsonaro victory on Oct. 25 could push shares of B3 up by as much as 45%, Euronews reported. Trading Economics noted that the narrow margin means volatility is likely to continue through the campaign.
For more stories on politics and money, see our world news section, and for stock moves around the globe, see markets news. The bond selloff in Europe is covered in our report on France's borrowing costs.
Sources
- Trading Economics, Brazil stock market (Ibovespa)
- Trading Economics, Brazilian real
- Euronews, São Paulo stock exchange surges after Flávio Bolsonaro election result
- Latin Times, How Flávio Bolsonaro's unexpected lead triggered the biggest market day in Brazil's history
- Yahoo Finance, Stock market today: Nasdaq, Nvidia post record highs
