Brazilian Real Futures Sink 10% After Lula Reelection as Tokyo Ibovespa ETF Plunges 15%
Updated
Updated · Reuters · Oct 26
Brazilian Real Futures Sink 10% After Lula Reelection as Tokyo Ibovespa ETF Plunges 15%
3 articles · Updated · Reuters · Oct 26
Summary
November real futures dropped 10% in Asian trading after Luiz Inacio Lula da Silva won reelection, signaling investors were rapidly unwinding bets on a right-wing shift.
Nomura's Tokyo-listed Ibovespa-linked ETF fell 15%, extending a reversal after Brazilian assets had rallied into the runoff on expectations of tighter fiscal policy under Flavio Bolsonaro.
Friday's positioning left markets exposed: the Ibovespa had closed nearly 7% above its pre-first-round level, the real was almost 5% stronger against the dollar, and rate futures had priced in lower borrowing costs.
Lula's team is targeting a primary surplus of about 1.3% of GDP by 2030, but investors want a detailed fiscal plan as public debt already exceeds 82% of GDP and an opposition-leaning Congress could complicate spending restraint.