Brazil: Markets react pessimistically to Lula da Silva's victory

The victory by Luiz Inácio Lula da Silva in the presidential election in Brazil has been met with deep pessimism by the markets. The São Paulo Stock Exchange (IBOVESPA) plummeted nearly 17% at the start of the trading day, even leading to a brief trading halt before the market opened.

The IBOVESPA, South America's leading index—which is composed of large companies, primarily from the energy sector—such as Petrobras—and the financial sector—such as Itaú Unibanco—opened at less than 170,000 points, marking a 16.85% drop from yesterday's close.

This sharp plunge triggered a trading halt lasting about 30 minutes.

The real depreciates

The real also suffered a sharp decline: on Monday, it depreciated by more than 10% following the reelection of Lula da Silva as president of Brazil.

At the start of the trading day, the Brazilian currency fell 10.7% against the dollar, to 5.5750 reais per U.S. dollar.

Lula da Silva received 51.74% of the votes in the second round of Brazil's presidential election, managing to stage a comeback the result obtained in the first round, where he finished behind the conservative candidate Flávio Bolsonaro, son of former President Jair Bolsonaro.

With this result, the president—one of the continent's leading figures in socialism—remains in power for the fourth time in his career.

Bolsonaro stated that he does not recognize his opponent's victory, asserting that his team will file an appeal for the Brazilian courts to invalidate these elections and order a re-vote.

Abroad, Lula da Silva's victory has been met with mixed reactions. President Donald Trump questioned the result and compared the situation to that of the 2020 U.S. election.

Several European leaders, such as Ursula von der Leyen (president of the European Commission) and Emmanuel Macron (France) congratulated the winner, while Claudia Sheinbaum (Mexico), Mark Carney (Canada) and Cuban dictator Miguel Díaz-Canel were more effusive in their congratulations to Lula da Silva.