São Paulo Stock Exchange Suspends Trading Following Lula’s Victory
Trading on the São Paulo Stock Exchange, Latin America’s largest, was halted for 30 minutes on Monday after the market fell nearly 17% following the re-election of left-wing President Luiz Inácio Lula da Silva. Lula defeated conservative Flávio Bolsonaro in the election.
The steep decline in the benchmark Ibovespa index prompted the exchange’s “circuit breaker” mechanism, which is activated during sharp market drops.
In addition, the US dollar rose 12% against the Brazilian real, marking one of the most significant daily fluctuations in history. Consequently, the price of raw sugar, a key export for Brazil, dropped nearly 5% due to the falling exchange rate.
Despite predictions favouring a Bolsonaro win, uncertainty remains as the right-wing senator has refused to concede and has pledged to contest the election results.
Chris Turner, a strategist at ING in London, noted that the financial markets are keen to see how quickly Bolsonaro accepts the outcome and allows constitutional processes to proceed. Attention is now on Lula’s selection of a finance minister, which will signal his fiscal policy direction. Graham Stock from RBC BlueBay Asset Management mentioned that the commitment to fiscal discipline will be a crucial indicator for the markets, beginning with the new finance minister’s appointment in the coming weeks.
