Brazil ETF Down 27% Premarket After Lula Wins Runoff, as Flávio Bolsonaro Vows to Seek Annulment

Since Sunday's runoff, Oct. 25, in which Luiz Inácio Lula da Silva beat Sen. Flávio Bolsonaro for a fourth term, the first market reaction has come in premarket trading today, Oct. 26: Brazil-linked U.S. listings are getting hit hard while the broader U.S. tape is up.

Brazilian shares take the brunt

As of 8:15 a.m. ET, the iShares Brazil ETF (EWZ) was down 27% in premarket trading. Among individual names, XP was off 48%, StoneCo 35%, PicPay 34% and Nubank 23%.

The Brazilian real was expected to gap 5% to 7% lower at the local open. That is a forecast, not a completed move.

Lula won 51.8% to 48.2%. With more than 96% of ballots counted, NPR's tally showed him above 51% and Bolsonaro above 48%. CNN reported Lula added more than 10 million votes between the Oct. 4 first round and the runoff, against 3.6 million for Bolsonaro. He flipped Minas Gerais from a deficit of nearly 590,000 votes to a win of about 99,000, and carried all nine northeastern states.

No candidate trailing after the first round had won a runoff since Brazil's return to democracy.

Bolsonaro refuses to concede

Bolsonaro called the result "inexplicable" outside his Brasília home and said he would seek to annul the vote. "It is impossible to recognize the election results given the circumstances in which these events unfolded," he said.

His objection centers on election-day voting hours. Supreme Court Justice Cristiano Zanin extended voting by two hours, to 7 p.m., after both campaigns asked for more time. Lula's team cited reduced local bus service. Bolsonaro's cited heavy rain in some states.

Bolsonaro argues the extension was applied unevenly and undermined equal voting conditions. Some polling stations had already deactivated their electronic machines and could not reopen.

Lula framed his win as a "defeat of denialism. A defeat of lies." He also said Brazil would not be "anyone's backyard," a message aimed at President Trump. Flávio Bolsonaro had campaigned on closer ties with Trump and pledged to pardon his father, Jair Bolsonaro, who is serving a 27-year sentence under house arrest for plotting a coup after his 2022 defeat to Lula.

No verified evidence of fraud has been presented in the accounts of the vote. The dispute rests on the two-hour extension and the machines that had already shut down. How that plays out in court is unresolved.

CNN noted that the right still holds its grip on Brazil's Congress and state governments. That limits what Lula can do with a fourth term, even with a larger margin than in 2022.

U.S. futures rise anyway

S&P 500 futures were up 0.4% at 7,665.75 as of 8:15 a.m. ET. Nasdaq futures gained 0.7%, and Dow futures rose 0.4%, or 186 points, to 52,580. The 10-year Treasury yield sat flat at 4.99%.

Friday's session ended with the S&P 500 down 0.5%, a second straight weekly drop and a close below its 50-day moving average. Concern over how AI spending is funded had spread from tech stocks into credit.

Meta led the Magnificent Seven premarket, up 2.4%. The company launched a $35 billion offering this morning: $22.5 billion of Class A common stock and $12.5 billion of mandatory convertible preferred. It also plans an at-the-market program of up to $60 billion in non-voting Class C shares starting in 2027. Nvidia, AMD and Broadcom have indicated interest in buying up to $5 billion of the offering.

Tesla gained 1.8% after Barclays upgraded it to overweight from equal-weight. Verizon reports earnings today.

Oil slips on Iran diplomacy

WTI fell about 2% to roughly $101 a barrel. Brent was down 1.6% at $114.92. The drop follows reports that Qatari mediators visited Tehran over the weekend, and that Saudi, Turkish and Pakistani officials are traveling to Iran, in an effort to revive U.S.-Iran talks.

Oil gained more than 6% last week. European natural gas was up 3%, near its highest since 2022. Gold rose 0.5% to above $4,000, and Bitcoin hovered around $80,400.

Moody's unexpectedly kept France at Aa3, and the gap between French and German bond yields narrowed to about 158 basis points.

What comes next

The Fed is in its blackout period ahead of Wednesday's FOMC decision. The Treasury sells $69 billion in two-year notes at 1 p.m. ET today. The Chicago Fed national activity index came out at 8:30 a.m., and Dallas Fed manufacturing data is due at 10:30 a.m.

The open in São Paulo, and whether Bolsonaro's team follows his announcement with a formal court challenge, will show whether the premarket losses in Brazilian names hold. Lula turns 81 tomorrow, Oct. 27.