Brazil Stocks, Real Plunge After Lula Reelection; Bovespa Falls 15%, Real Drops 11%

Brazilian stocks and the real posted historic losses on Monday after the surprise reelection of President Luiz Inacio Lula da Silva reversed recent market bets on a right-wing ascent to power. The real tumbled over 11% against the dollar in early spot trading, one of its biggest daily declines on record, while the benchmark Bovespa index fell more than 15%, its largest daily percentage drop since 1998. Trading was halted for 30 minutes after the Bovespa fell 10%, triggering the circuit breaker, operator B3 said. Five-year credit default swaps jumped to 151.67 basis points from Friday's 120.21. The Treasury cancelled bond auctions scheduled for October 27 and October 29. The real was down 8.3% at 5.4274 per dollar, and raw sugar prices slid 5.6%. The selloff marks a sharp reversal from this month's rally on expectations of a shift to the right after Senator Flavio Bolsonaro finished first in the opening round. The Bovespa closed Friday almost 7% above its pre-vote level. Attention now turns to Lula's choice of finance minister and what it signals about fiscal discipline. Lula's team aims for a budget surplus of about 1.3% of GDP by 2030.