Lula wins Brazil runoff in upset; EWZ crashes ~19% overnight as Bolsonaro bets unwind

What happened

Brazilian President Luiz Inacio Lula da Silva won re-election in Sunday's runoff, taking 51.78% of valid votes (64,248,884) against 48.22% (59,822,138) for right-wing Senator Flavio Bolsonaro, with 99.99% counted, becoming the first president to begin a fourth term. The upset — prediction markets had favored Bolsonaro — triggered a sharp overnight selloff in U.S.-listed Brazilian assets: the iShares MSCI Brazil ETF (EWZ) fell 18-19.6% in after-hours trading, Petrobras ADRs lost 11-16%, Itau Unibanco ADRs fell about 13.7%, Vale slipped over 4%, and MercadoLibre dropped about 7%. November real futures fell about 10% on CME, and a Tokyo-listed Ibovespa ETF plunged 15%, with the implied dollar for Monday near R$5.50 versus Friday's R$4.993 close. Bolsonaro's team late Sunday asked courts to annul the runoff over voting issues, according to Investor's Business Daily.

Who’s affected

• iShares MSCI Brazil ETF (EWZ) — down 18-19.6% in U.S. overnight trading, the direct vehicle for the unwind
• Petrobras (PBR) — ADRs down 11-16%; state oil giant exposed to Lula's energy and fuel-pricing policy
• Itau Unibanco (ITUB) — ADRs down ~13.7%; Brazil's largest private bank, proxy for domestic credit and rates
• Vale (VALE) — ADRs down ~4.4%; iron-ore miner exposed to Brazilian fiscal/royalty policy
• MercadoLibre (MELI) — down ~7% early Monday; Brazil is its biggest market
• XP (XP), Bradesco, Nu Holdings (NU), Ambev — also down sharply overnight; broad Brazilian equity and consumer/fintech exposure
• Emerging-market equities and the Brazilian real — real futures down ~10% on CME, implied dollar near R$5.50 vs R$4.993 Friday close

Sources

investors.comkrro.commorningstar.combullquill.comtradingview.com