Brazil’s real falls 12%, stocks halted after Lula win

Brazil’s real fell about 12 per cent against the U.S. dollar and trading on São Paulo’s stock exchange was halted on Oct. 26, hours after President Luiz Inácio Lula da Silva won re-election.

Investors had bet on a victory by Sen. Flávio Bolsonaro, and the shock erased a rally that followed the first round earlier in October. The Bovespa index had closed the previous Friday almost seven per cent above its pre-first-round level, Al Jazeera reported.

The exchange operator B3 stopped trading for 30 minutes after the Bovespa fell 10 per cent, triggering a circuit breaker. Reports differ on how far the index fell. Quartz, citing Reuters, said it fell nearly 17 per cent, at one point down more than 15 per cent. Al Jazeera said index futures fell nearly 15 per cent. The Latin America Daily Briefing put the one-day drop at 13.9 per cent.

Lula won the runoff with 51.8 per cent of the vote to Bolsonaro’s 48.2 per cent, according to electoral authorities cited by Quartz. Our earlier report on the runoff has the political background, and our pre-election report shows how polls had narrowed.

Petrobras shares lost more than 10 per cent in São Paulo and shares in the brokerage XP were cut in half, Quartz reported. In New York, the Brazilian fintech Nu Holdings fell 21 per cent and MercadoLibre fell 10 per cent. The yield on a U.S. dollar-denominated Brazilian bond due 2030 rose to 7.032 per cent from 6.796 per cent the previous Friday. Interest rate futures rose 3.1 per cent, Al Jazeera said.

Brazil’s Treasury cancelled auctions of inflation-linked and fixed-rate debt that had been scheduled for Oct. 27 and 29, Quartz reported. An auction of Treasury Financial Bills on Oct. 27 was still going ahead.

“I’m not surprised the real is sinking sharply,” Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, told Al Jazeera. She said traders were “covering their bets that assume a Bolsonaro victory and tighter fiscal policy.” She added that the real is “still likely to be supported by strong commodity revenues.”

“Everyone is very surprised today,” Chris Turner, ING’s global head of markets, said, according to Quartz. He said there had been “a strong consensus that it was going the way of Bolsonaro which was seen as positive for local assets.”

Attention now turns to who Lula names as finance minister. “For investors, first and foremost would be who would lead the Ministry of Finance,” Goldman Sachs analysts Alberto Ramos and Panteleymon Semka said, as quoted by Quartz. Lula’s team is aiming for a primary budget surplus of about 1.3 per cent of gross domestic product by 2030, Al Jazeera reported. Public debt already exceeds 82 per cent of GDP.

Bolsonaro refused to concede on election night. The Latin America Daily Briefing of Oct. 27 reported that he has since dropped his call to annul the vote in favour of a lawsuit alleging Lula abused incumbency. Brazilian Supreme Court Justice Alexandre de Moraes has since ordered him to surrender his passports, including his diplomatic one, and barred him from leaving the country, the briefing said. Bolsonaro denies wrongdoing and says the order is meant to intimidate him. We reported the passport order separately.

For Canada, the main link is trade policy. Prime Minister Mark Carney and Lula agreed on Nov. 23, 2025, in Johannesburg, to intensify negotiations on a Canada-Mercosur free trade agreement, the Prime Minister’s Office said in a readout. It put the combined economy of the Mercosur bloc, which also includes Argentina, Paraguay and Uruguay, at more than $4 trillion, and named industrial goods, chemicals, forestry and seafood as areas of opportunity for Canadian exporters. We did not find a Canadian government statement on the market moves.

Market reaction is still developing. The next signals are the choice of finance minister and whether the real and the Bovespa recover when trading resumes.

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Via Al Jazeera, Quartz (citing Reuters) and the Latin America Daily Briefing.