Brazilian stocks fell sharply in Sunday-night trading after Luiz Inacio Lula da Silva narrowly won re-election in the presidential runoff against Senator Flavio Bolsonaro. Investor's Business Daily reported that the iShares MSCI Brazil ETF dropped nearly 20% on Robinhood, while state-owned oil giant Petrobras fell 14% and Latin American e-commerce group MercadoLibre, for which Brazil is its biggest market, slipped 5%.

A reversal of the first-round rally

The move reversed the market's reaction to the first round on 4 October, when Bolsonaro finished first. The Brazil ETF had soared 12.5% on 5 October to its highest since February 2020, with XP up 39.1%, Itau Unibanco up 15.5% and Petrobras up 11.5% in the same session. Bolsonaro had been favoured by many investors for a platform of tighter fiscal policy and lower corporate taxes, and he had narrowly led the first round with 47.03% against Lula's 45.16%.

What the trading does and does not show

Sunday-night moves on a trading app are early, thin indications rather than an official market close, and some stocks, including XP, Vale and Itau Unibanco, were not yet active on Robinhood when the falls were reported. The direction, however, was clear: traders priced in a Lula presidency after the runoff result, unwinding bets placed on a Bolsonaro win. The full picture will come when Brazil's own market opens and the ETF and its holdings trade in normal session hours.

Sources: Investor's Business Daily; Reuters election result reporting.