U.S.-listed shares of Brazilian companies rallied on Monday after right-wing Senator Flavio Bolsonaro performed significantly better than polls had predicted in the first round of Brazil’s presidential election.
The result surprised investors and raised expectations of a broader rally across Brazilian financial markets.
Bolsonaro Outperforms Election Polls
Flavio Bolsonaro, the son of former President Jair Bolsonaro, secured around 47% of the vote. He will now face President Luiz Inacio Lula da Silva in a runoff election later this month.
Lula received approximately 45% of the vote. Most pre-election polls had predicted that the Brazilian president would finish the first round in the lead.
The unexpected result quickly boosted investor sentiment toward Brazilian assets.
Brazilian Stocks Surge in U.S. Trading
Petrobras ADRs climbed roughly 10% in U.S. premarket trading following the election result.
Brazilian banks also posted strong gains. Banco Bradesco and Itau Unibanco both rose more than 9%.
Meanwhile, Nu Holdings jumped about 10.5%, while mining giant Vale gained around 8%. Ambev advanced approximately 7%, and aircraft manufacturer Embraer rose more than 6%.
European companies with significant exposure to Brazil also moved higher. Madrid-listed Telefonica and Santander gained close to 2% each.
Investors See Potential for a Broader Brazil Market Rally
The reaction resembles what happened following Brazil’s election four years ago.
After Jair Bolsonaro performed better than expected in the first round of that election, the Brazilian real strengthened by more than 4% against the U.S. dollar. The Bovespa index also surged 5.5% during the following trading session.
Ivo Chermont, chief economist at Quantitas, said Brazilian markets could experience a similar reaction this time.
Chermont expects a strong rally across several Brazilian asset classes. His forecasts include a 2% to 4% decline in the U.S. dollar against the Brazilian real and a 4% to 6% rise in equities.
He also expects both nominal and real interest rates to move significantly lower.
Markets Will Watch Bolsonaro’s Economic Policies
Although the election result could support Brazilian markets in the short term, investors will now focus on Bolsonaro’s economic agenda.
Markets are likely to look for clearer signals that he intends to address some of Brazil’s most important economic and social challenges.
The election campaign has focused heavily on the rising cost of living, corruption and crime. These issues are expected to remain central ahead of the runoff vote.
Political Controversies Could Shape the Second Round
Both leading candidates could also face renewed scrutiny over political controversies during the second-round campaign.
One major issue involves the collapse of Banco Master. Its former head, Daniel Vorcaro, was arrested earlier this year and accused of involvement in a multibillion-dollar fraud scheme.
Federal police are investigating Flavio Bolsonaro for alleged money laundering linked to the case. Bolsonaro has denied the allegations.
Meanwhile, Lula’s allies have raised concerns about how the U.S. administration could respond if Lula wins another term.
U.S. President Donald Trump has not formally endorsed either candidate. However, he has previously hosted Flavio Bolsonaro at the White House and publicly praised him.
Brazil Runoff Election Takes Center Stage
The upcoming runoff will now become the main focus for investors.
Brazilian stocks, the real and local interest rates could remain highly sensitive to polls, campaign statements and economic policy signals in the coming weeks.
After Bolsonaro’s stronger-than-expected first-round performance, markets are likely to closely monitor whether the momentum behind Brazilian assets can continue into the second round.
