Key facts
- Brazilian markets are expected to rally on Monday following Senator Flavio Bolsonaro's strong first-round performance.
- Flavio Bolsonaro secured 47% of the vote, exceeding poll expectations.
- President Luiz Inácio Lula da Silva received 45% of the vote.
- A second-round runoff election between Bolsonaro and Lula is scheduled for October 25.
- Analysts anticipate a stock market rise and strengthening of Brazil's currency, the real, against the dollar.
Brazilian markets are poised for a significant rally on Monday after Senator Flavio Bolsonaro outperformed expectations in the first round of the presidential election, analysts told Reuters. Bolsonaro, the son of former President Jair Bolsonaro, secured 47% of the vote, surpassing his main rival, incumbent President Luiz Inácio Lula da Silva, who garnered 45%. This result sets up a runoff election scheduled for October 25.
Analysts anticipate a positive market reaction, forecasting a rise in Brazilian stocks and a strengthening of the country's currency, the real, against the dollar. Pedro Galdi, investment analyst at AGF Investments, expects the market to rally, stocks to rise, and the real to strengthen, citing a desire for change and reform away from the current government's high public deficit.
Similar to the market's reaction four years ago when former President Jair Bolsonaro had a stronger-than-expected performance, a similar rally could occur. Ivo Chermont, chief economist at Quantitas, predicted a rally across asset classes, with the dollar potentially falling 2% to 4% and equities rising 4% to 6%. Bryan Harris of Sabio noted that the strong showing will spark renewed confidence in the short term, though he cautioned about the senator's limited experience in economic policymaking.
The campaign has been marked by polarization, focusing on the rising cost of living, corruption, and crime. Both Bolsonaro and Lula skipped major TV debates. Scandals have dogged both leading candidates, with investigations into figures linked to the defunct Banco Master potentially impacting the runoff.