Brazilian stocks, currency head for bruising monthly losses after election upset

BRASILIA: Brazilian markets extended recent losses on Friday, putting the country’s stock index on track for its worst monthly performance in more than four years, as investors assessed the fiscal outlook after President Luiz Inacio Lula da Silva’s surprise re-election.

The Bovespa index fell 0.9 percent and was set for its steepest monthly decline since June 2022.

The real weakened 1.3 percent against the dollar and was set for its biggest weekly drop since November 2008.

The selloff began earlier this week after Lula’s victory in the October 25 runoff election. Markets had largely priced in a win for his right-wing opponent, Senator Flavio Bolsonaro, whom investors viewed as likelier to pursue more conservative fiscal policies.

Brazilian assets rallied sharply ahead of the election before surrendering those gains after Lula’s win.

“Locals are still trying to understand how campaign pledges will be met amid fiscal fragility and other inflationary shocks,” said Mauricio Une, head of South America macro strategy at Rabobank.

“After the October 25, 2026, runoff, Lula is still assessing names for his cabinet, but the market is growing anxious,” he added.