Lula Re-election Sends Brazilian Assets Lower Overseas

Luiz Inácio Lula da Silva’s reelection as Brazil’s president was followed by sharp declines in Brazilian-linked assets during overseas trading, before the country’s domestic markets reopened on Monday. November futures for the real fell about 9% to 10%, while Tokyo-listed funds tracking Brazilian equities dropped by more than 11% and, in one report, about 15%. Those moves did not establish how Brazilian stocks would perform during the local trading session. Brazil’s Superior Electoral Court reported that Lula won 51.79% of valid votes in the runoff, against 48.21% for Senator Flávio Bolsonaro. The result reversed investors’ expectations of a government more likely to pursue tighter spending. Bolsonaro had finished first in the opening round, and Brazilian stocks and the real had gained ground in the weeks before the runoff. Before the election result, Brazilian stocks were nearly 7% above their level before the first round, while the real had strengthened almost 5% against the U.S. dollar. The subsequent overseas declines came as traders reassessed those positions. A Tokyo-listed fund tracking the Ibovespa, Brazil’s benchmark stock index, fell more than 11% at the start of...