Lula Wins Brazil Presidential Runoff, Triggering 25% Crash in Brazilian Assets Premarket

Luiz Inácio Lula da Silva won an unprecedented fourth term as Brazil's president on Sunday, defeating Senator Flávio Bolsonaro in the runoff election in a dramatic comeback after trailing in the first round. The result caught markets badly off guard: investors had driven Brazilian stocks to record highs after Bolsonaro's strong first-round showing earlier in October, betting on a more fiscally disciplined government. With Lula's win reversing those expectations, the iShares MSCI Brazil ETF fell 25% in premarket trading Monday morning.

The selloff hit Brazilian-linked stocks across the board. XP Inc. plummeted roughly 45% in premarket, while StoneCo, Inter and Co, MercadoLibre, Banco Bradesco, Itaú Unibanco, Embraer, and Vale all dropped sharply. Concerns center on Brazil's worsening fiscal position under Lula, which has already been marked by mounting public debt, double-digit interest rates, and rigid mandatory spending. Bolsonaro reportedly refused to concede and called for the election result to be annulled, adding political uncertainty to the market turmoil.

Separately, neocloud stocks fell after Elon Musk posted on X that more than 200 companies in the sector would face "guppy-level death and consolidation." Nebius and CoreWeave each dropped more than 4% in premarket. CoreWeave has already fallen 38% in October, with its market value sliding from a peak of roughly $90 billion to about $30 billion, and Musk noted that debt markets are growing reluctant to finance the sector. Musk added that SpaceX closed $40 billion in GPU financing on the strength of its own balance sheet, contrasting it with the leveraged neocloud model.

Tesla bucked the broader softness, rising 2% in premarket after Barclays upgraded the stock to overweight, citing potential M&A upside from a combination with SpaceX, growth in the Robotaxi business, and core business strength. Moderna continued to slide, falling 8%, extending last week's plunge after results from a closely watched personalized cancer vaccine trial co-developed with Merck leaked early online before their scheduled presentation at the ESMO Congress.