Global Markets
Lula wins Brazil's runoff, putting the post-first-round rally in Brazilian assets to the test
President Luiz Inácio Lula da Silva came from behind to beat Flávio Bolsonaro, a result most fund managers in a Citi survey expected to hit stocks, the real and local rates.
HedgeWeekly News Desk ·
Luiz Inácio Lula da Silva has won Brazil's presidential runoff, securing a non-consecutive fourth term that starts on January 5, 2027. Brazil's electoral court said on Sunday evening that Lula held an unassailable lead with the count complete. With 99.86% of polling stations reported, a live tally of court data showed Lula on 51.76% of valid votes, about 64.1 million, against 48.24%, or roughly 59.8 million, for Senator Flávio Bolsonaro. Turnout was 80.79%.
The result reverses the first round on October 4, when Bolsonaro led with 47.03% to Lula's 45.16%. No candidate who finished second in the first round had gone on to win since military rule ended in 1985. The count was paused for two hours after a Supreme Court justice extended voting, and that ruling could draw a legal challenge from the Bolsonaro camp. Neither candidate had spoken to supporters when the result was announced. During the count, Polymarket and Kalshi swung to give Lula a 91% chance of winning.
Local markets had leaned the other way. The Ibovespa gained 15.3% from August to Friday's close of about 205,000, including a 7.7% jump on the first trading day after the first round, its biggest one-day rise since March 2020. The real ended Friday stronger than 5 per dollar and local rate futures fell sharply after the first round, as investors backed Bolsonaro's plan to replace Lula's fiscal framework with a constitutional spending cap.
Why it matters: positioning is the key risk when Brazilian trading opens on Monday. In a Citi survey of 73 fund managers taken before the vote, about 80% expected the Ibovespa to fall more than 5% in the first session after a Lula win, 63% expected the real to weaken by more than 5%, and roughly two-thirds expected local rate futures to rise by more than 100 basis points. The focus now moves to the 2027 budget: Folha de S.Paulo estimated some of Lula's proposed benefits would cost R$53.6 billion to R$82 billion next year. He will also face a Chamber of Deputies where Bolsonaro's PL is the largest party, with 121 of 513 seats.