Brazil ETF Plunges 25% Premarket After Lula Wins Fourth Term
Luiz Inácio Lula da Silva won Brazil's Sunday runoff with 51.8% of the vote, securing a fourth term. Rival Flávio Bolsonaro took 48.2%, refused to accept the result and called for the vote to be annulled. Markets had priced a Bolsonaro win; he led the first round 47.0% to 45.2%.
According to Benzinga, the iShares MSCI Brazil ETF (EWZ) fell 25% in premarket trading to $31.80. That would be the fund's worst day since its 2000 launch; the previous record was a 23.1% drop in March 2020. The market read this as a budget story, not an election story.
The losses spread across Brazilian shares listed in the US. XP fell 48%, Nu Holdings 25%, Itaú Unibanco 26%, Bradesco 31% and StoneCo 37%. ING expects the dollar to jump 5-7% against the real, to 5.20-5.25.
The worry is fiscal. Investors had expected Bolsonaro to tighten the budget, and the Bovespa had gained about 7% since the first round. Lula's pledges point to slower consolidation; Aberdeen puts the deficit near 10% of GDP.
What is new in oil is a decline despite an attack. The Houthis said Monday they struck pumping stations on Saudi Arabia's East-West pipeline; Riyadh has not confirmed it. Even so, December Brent fell 1.5-2% to $114-115.
Diplomacy drove the drop. Qatari mediators were in Tehran on Sunday, and senior officials from Saudi Arabia, Turkey and Pakistan meet Iran's leadership today. The East-West line, with 7 million barrels a day of capacity, is Saudi Arabia's main route around the Strait of Hormuz.
Tech has two financing stories. launched a $35B sale of common stock and mandatory convertible preferred shares, part of a program of up to $95B. The stock is up 2.4% premarket, while and are down about 3% after Elon Musk warned about GPU rental companies.
