Brazilian ADRs plummet after Lula's surprise election win
EWZ•U.S.-listed shares of Brazilian companies fell premarket after Luiz Inacio Lula da Silva won a historic fourth term. Petrobras fell 20%, Itaú Unibanco 28.5%, Banco Bradesco 26.8%, Nu 24%, MercadoLibre 10.3% and the iShares MSCI Brazil ETF 26%.
1. Shares slide after election
U.S.-listed shares of Brazilian companies fell premarket after Luiz Inacio Lula da Silva won a historic fourth term in a result that defied polls. Petrobras fell 20%, Itaú Unibanco 28.5%, Banco Bradesco 26.8%, Nu 24% and MercadoLibre 10.3%; the iShares MSCI Brazil ETF fell 26%. Analysts and markets had bet on a victory by Senator Flavio Bolsonaro, pricing in reforms as Brazil faced deteriorating public finances and higher interest rates.
2. Reform hopes fade
“Lula's surprise win will dash hopes for reforms that would improve public finances and strengthen growth prospects,” said William Jackson, chief emerging-markets economist at Capital Economics. Jackson said interest-rate cuts at two meetings this year no longer seemed likely as higher fiscal risks and a weaker real could weigh.
