Brazilian stocks jump as Bolsonaro now seen as heavy favorite to win presidency
Brazilians will decide in just under three weeks whether to re-elect incumbent president Luiz Inácio Lula da Silva or oust him with Flávio Bolsonaro — the son of former president Jair Bolsonaro — as both advanced to a run-off after receiving the most votes in the first round vote on Sunday.
But the results of the first round are recalibrating how investors are pricing what the final decision will be.
Speculators on prediction market platform Kalshi now give Bolsonaro a more than 80% chance of winning the presidency. Before Sunday's first round results came in, he had about a 60% chance to win. On Polymarket, Bolsonaro's odds are now 85%, jumping from 63% before the first round count.
While Bolsonaro was seen as a narrow favorite to win the presidency before Sunday's first round, he was widely expected to trail the incumbent Lula in that initial tally, according to pre-election polls. This was the case even as Bolsonaro was favored to win a run-off. However, Bolsonaro secured more than 47% of the votes, and beat Lula's first round total by nearly 2 percentage points.
If no candidate receives a majority of the votes in a first round Brazilian presidential election, the two who get the most votes advance to a run-off.
Brazilian assets were on the rise following the result.
The iShares MSCI Brazil ETF (EWZ) was up more than 12% on Monday. U.S.-listed shares of Itau Unibanco gained 15%, and Banco Bradesco surged 19%. Brazil's local Bovespa index was up 8%.
Investors broadly saw Bolsonaro as more favorable to markets, as the candidate is promising greater fiscal discipline. In June, Brazil's deficit-to-GDP ratio was almost 10%.
Lula is running for a fourth term as president. He won back the presidency in 2022 — after a 12-year stint out of the office — where he defeated then-incumbent Jair Bolsonaro. Lula's campaign has tried to tie Flávio Bolsonaro to his father's efforts to contest his 2022 loss and brand the son as corrupt.
The run-off in Brazil will take place on Oct. 25.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
