Brazilian markets have plunged after a shock victory by Left-wing candidate Luiz Inácio Lula da Silva raised fears of fresh economic turmoil for South America's largest economy.
The Ibovespa, Brazil's equivalent of the UK FTSE 100, fell by as much as 17pc on Monday, while the Brazilian real slumped by up to 12pc against the dollar – the most in more than two decades – as financial markets baulked at Mr Lula's win.
The sharp fall in Brazilian stocks triggered an automatic 30-minute circuit breaker for the first time since 2020, when the pandemic sparked a global sell-off in stocks. Some individual stocks plunged as much as 60pc.
"I have been following the markets since 2001, and I have only seen the magnitude and voracity displayed today on a few rare occasions like Sept 11 and during the pandemic," Eduardo Cohn, a fund manager at Heritage Capital, told Bloomberg.
Mr Lula, who has led Brazil since 2023 and was also president between 2003 and 2011, beat the hard-Right candidate Flávio Bolsonaro in Sunday's election.
The 80-year-old trade unionist stunned investors by securing his fourth term, with observers widely expecting Mr Bolsonaro – son of the jailed former president Jair Bolsonaro – to win.
Mr Lula's victory has raised fears he will shun tough decisions on public spending and debt. Brazil budget deficit exceeds more than 9pc of the country's economy.
Brent Donnelly, from Spectra Markets, said the foreign exchange markets had been "hit by a neutron bomb" after the "shocker" election result.
He said: "While it's easy for strategists to roll out the 'buy the dip' messages, it's hard for real humans to risk manage a situation like this because the foreign exchange options market is hit by a neutron bomb, and some equity options presumably torched as well."
Mr Donnelly added that in the longer term, the real "has been fine under all types of government and has outperformed under Lula".
He added: "This is not because he is an economic miracle worker. It's because external factors like China's accession to the World Trade Organisation have dominated idiosyncratic policy and politics in Brazil."
Following Mr Lula's win, major agricultural commodities were also hit, with sugar, coffee and soybean futures contracts coming under pressure.
US-denominated futures for sugar and arabica coffee fell by as much as 4pc, soybeans by 2pc, and Robusta coffee hit a two-year low.
Mr Lula won 51.8pc of the vote against 48.2pc for Mr Bolsonaro. The Right-wing contender had been ahead in the election's first round on Oct 4, which was followed by Brazilian stocks surging to record highs.
The president has struggled more to find common ground with Donald Trump , who in July hit Brazil with tariffs of 25pc on many key exports.
