Brazilian markets tumble after Lula's re-election as investor attention shifts to technology

Brazilian assets plunge

Brazilian markets fell sharply on Monday after the unexpected re-election of left-wing President Luiz Inacio Lula da Silva in the runoff vote, AFP reports. His right-wing rival Flavio Bolsonaro, son of jailed former leader Jair Bolsonaro, said he would contest the election results.

Conflicting figures on the scale of the fall

The two versions of the AFP story differ in their figures. The first, published around 17:56 GMT, said that the real plunged more than 10% against the dollar, while the Sao Paulo stock exchange fell almost 17%, triggering a 30-minute trading halt. In the agency's updated version (21:16 GMT), the exchange was down 13.7% at the close, close to a two-month low, while the real weakened by about 8.5%. Thus, Brazilian assets recovered part of their deepest losses over the course of the day. ING analyst Chris Turner attributed the pressure on assets to the fact that, instead of the fiscal consolidation seen under Bolsonaro, the market will now have to factor in Lula's campaign promises, including a shorter working week.

Focus on technology and AI

Outside Brazil, investors' attention was fixed on tech companies' earnings. SPI Asset Management analyst Stephen Innes noted that the AI sector was 'under the microscope' ahead of what may be the most important stretch of earnings season: investors are waiting for Microsoft, Alphabet and Amazon to prove that the billions poured into computing infrastructure are creating a sustainable profit machine rather than just 'a shinier version of the same capex furnace'. This week will also bring reports from South Korean chipmakers SK hynix and Samsung.

Meta and Anthropic

Although last week's results from Tesla and Meta heightened concerns about spending, Meta announced on Monday a $35 billion share offering to fund its AI ambitions, as well as plans for another offering of up to $60 billion with no date yet set. The final figures on Meta's share performance also differ between the two AFP versions: the first said the stock had recovered to a slight gain by midday, while the second reported a 1.88% decline at the close. In addition, Anthropic announced plans to go public in mid-November; according to AFP, its revenue for the first half of the year grew by roughly 1,300% year on year, though the company itself pointed to safety risks.

Trading results and the week ahead

Wall Street's major indexes closed higher: the Dow gained 0.3%, the S&P 500 0.7% and the Nasdaq 0.8% (the first AFP version cited a 1.0% Nasdaq gain at midday). European indexes ended in positive territory, while Asia finished mixed. Oil held near six-month highs amid supply concerns ahead of winter in the northern hemisphere; IG analyst Chris Beauchamp called rising oil prices 'kryptonite' for any sustained rally in risk assets. This week brings decisions from the Federal Reserve, the European Central Bank and the Bank of Japan, which are expected to keep rates unchanged, while the Bank of England is widely expected to raise rates in November after a spike in British inflation — on the eve of the annual budget to be presented on Wednesday.