Brazil markets brace for severe losses after Lula defeats Bolsonaro

Brazilian markets are bracing for severe losses Monday after President Luiz Inácio Lula da Silva defeated Flávio Bolsonaro in a runoff election, a result investors did not expect and largely opposed. Early indicators show a major selloff, with Brazilian equities ETFs falling up to 16% in Japan and currency derivatives implying a more than 10% drop in the real. Trading desks in Sao Paulo expect declines so steep that circuit breakers may be triggered, with the Ibovespa index potentially tumbling 11% in the first hour. Lula won 51.8% of the vote, while Bolsonaro, who called for the result's annulment, got 48.2%. Investors fear Lula will not pursue fiscal austerity needed to lower interest rates, and Brazil faces deep fiscal problems including record household delinquencies and public debt above 80% of GDP.