Luiz Inácio Lula da Silva's victory in Brazil's presidential election has led to a dramatic decline in Brazilian assets, with the iShares MSCI Brazil ETF (EWZ) dropping over 20% overnight, potentially marking its largest one-day loss.
The Brazilian Real futures fell 10% in Asian trading, and U.S.-listed Brazilian stocks also suffered, with Petrobras down over 20%, Itaú Unibanco down nearly 30%, and Ambev off 19%. Lula's win is concerning for markets as he is perceived to be less market-friendly than his opponent, Jair Bolsonaro, who had been expected to pursue fiscal austerity and deregulation.
Bolsonaro's refusal to concede and his plans to challenge the election results add further uncertainty. In the tech sector, Elon Musk's warning about the neocloud stocks has exacerbated their decline, with shares of companies like CoreWeave and Nebius plummeting over 30% in October. Investors are increasingly skeptical of their business models, which rely heavily on debt.
Additionally, oil prices are lower following recent geopolitical tensions, and this week is crucial for monetary policy decisions from major central banks, with expectations that they will maintain current interest rates.
The tech sector is also in focus as major companies like Alphabet, Microsoft, and Amazon prepare to report earnings, with investors looking for insights into AI advancements and cloud growth