Brazilian Markets Plunge After Lula Victory, Ibovespa Sees Steepest Drop Since 2020

Brazilian markets plunged Monday after Luiz Inácio Lula da Silva's reelection victory, triggering a circuit breaker on the Ibovespa, which closed down 14%, its steepest drop since the pandemic began in March 2020. The selloff, driven by investor expectations of higher fiscal risk under Lula, saw the dollar surge 8.2% to R$5.40. Trading volume tripled to R$88.6 billion, with 68 of 76 index stocks falling over 2%, including Magazine Luiza down nearly 60% and Banco do Brasil down 29%. The market had priced in a win for challenger Flávio Bolsonaro, whose defeat reversed post-first-round gains. Volatility is expected to persist until the new government signals fiscal responsibility commitments, while Bolsonaro has vowed to contest the result.