Brazil’s Ibovespa plunges 17.3% as Lula defeats Bolsonaro in presidential runoff; biggest-ever one-day crash

The Ibovespa plunged more than 17% to below 170,000 on Monday as Brazilian assets sold off following President Lula’s victory over Flávio Bolsonaro in the presidential runoff.The decline reversed the optimism that had supported markets since the first round, when Bolsonaro outperformed polling estimates and finished ahead of Lula. Investors had widely viewed a potential Bolsonaro administration as more likely to rein in public spending, considered essential to lowering interest rates.Following Lula’s victory, the index fell 17.3% to touch an intraday low of 169,516, its lowest level since August 25.

The crash also marked the biggest-ever single-day decline on the exchange.The sharp fall triggered a 30-minute trading suspension on the São Paulo Stock Exchange. The Ibovespa had surged after Bolsonaro’s victory in the first round of voting. The decline activated a "circuit breaker" mechanism provided for "periods of sharp market decline," according to a statement.Brazilian stocks had surged to record highs following Bolsonaro's first-round win earlier this month.

On Monday, they dropped below pre-election levels.Other critical moments that have previously triggered the circuit breaker mechanism include the subprime crisis in the United States in 2008 and the Covid-19 pandemic in 2020.Lula secures historic fourth termThe leftist president who turns 81 on Tuesday pulled off an improbable victory against the son of far-right ex-leader Jair Bolsonaro, securing 51.8% of the vote compared to his challenger's 48.2%, according to AFP report.Lula is concluding his third term with record employment rates and controlled inflation, although with rising public spending and growing debt.The historic result hands Lula, already the longest serving democratically elected leader in Latin America's largest country, an unprecedented fourth term.

It also preserves Brazil as a leftist bastion amid a rising right-wing tide across the region seen favorably by Trump.Brazilians complain about the loss of purchasing power while authorities are concerned about household indebtedness.The country maintains one of the highest benchmark interest rates in the world in an attempt to control rising prices, as per the AFP report.Disclaimer: We advise investors to check with certified experts before making any investment decisions.