Brazil funds fall as much as 31.6% after Lula wins the runoff
U.S. stocks rose, led by chips, and Surgery Partners jumped on a $23.50 cash bid.
Key takeaways
U.S.-listed Brazil funds fell as much as 31.6% on Monday after Luiz Inácio Lula da Silva won a fourth term as president.
BlackRock's iShares MSCI Brazil ETF, EWZ, closed at $34.15, down 19.8%. The iShares MSCI Brazil Small-Cap ETF, EWZS, fell 31.6% to $11.45, 11.8 percentage points more. EWZ traded 298 million shares, more than four times its average over the past 20 sessions.
Lula took 51.8% of valid votes to 48.2% for Senator Flávio Bolsonaro, the eldest son of former President Jair Bolsonaro, with nearly all ballots counted, CNBC reported, citing Brazil's Superior Electoral Court. He had lost the first round.
CNBC said the win caught markets off guard. The selloff, it said, reflected expectations of more market-friendly policymaking by Bolsonaro and broader jitters around Brazil's debt and spending. ING's Chris Turner told CNBC that Brazilian assets "have to contend with Lula's campaign pledges, including a shorter working week."
Three weeks earlier, prices had moved the other way. On Oct. 5, after Bolsonaro led the first round, the Ibovespa, Brazil's main stock index, jumped 7.7%, its best day since March 2020, and the real strengthened 4.1%, Reuters reported.
On Monday, Brazil's stock exchange halted trading for 30 minutes after the Ibovespa fell 10% from Friday's close, Al Jazeera reported. Later, as of 3:44 p.m. ET, the index was down 13.9%.
The real weakened too. At 4:50 p.m. ET a dollar bought 5.41 reais, 8.9% more than at Friday's close. These funds are priced in dollars, so a weaker real cuts what their Brazilian shares are worth, on top of the drop in the shares themselves.
In New York, the steepest loss was XP, a Brazilian brokerage, down 48.4% to $15.71. It traded as low as $13.78, a 52-week low.
The banks fell hard too. Banco Bradesco dropped 28%, and Itaú Unibanco dropped 20.4%. Citi analysts told CNBC that banking stocks will be hit by the risk that interest rates remain higher for longer.
Nu Holdings, the largest holding in EWZ at 8.6%, fell 17%.
Franklin Templeton's Franklin FTSE Brazil ETF, FLBR, fell 19.9%, in line with EWZ. Latin America funds fell less: the iShares Latin America 40 ETF, ILF, lost 11.2%, and Franklin Templeton's Franklin FTSE Latin America ETF, FLLA, lost 12.2%. The iShares MSCI Emerging Markets ETF, EEM, fell 0.3%.
Small-cap Brazil fell 31.6%; EWZ lost 19.8%
Chips and two buyouts
Away from Brazil, U.S. stocks rose. State Street's SPDR S&P 500 ETF, SPY, gained 0.7%. Invesco QQQ Trust, Series 1, QQQ, gained 1.1%.
The gain was in chips. Anthropic, the artificial-intelligence company behind Claude, filed for an initial public offering. CNBC said the filing revived enthusiasm for artificial-intelligence shares and soothed fears that spending on data centers was unsustainable.
The iShares Semiconductor ETF, SOXX, rose 2.9%, and NVIDIA rose 2.4%. Anthropic said revenue in the filing was $16.29 billion for the six months ended June 30, up from $1.16 billion a year earlier, CNBC reported.
Surgery Partners, which runs short-stay surgical centers, rose 47.6% to $23.25 after HealthSpan Partners, an affiliate of Bon Secours Mercy Health, agreed to buy it for $23.50 a share in cash, the company said. The offer is a 49% premium to Friday's $15.75 close. Bain Capital, which owns about 39%, will take a stake in the buyer instead of the cash, and the deal is expected to close in the first quarter of 2027 if shareholders and regulators approve.
Range Resources, an Appalachian natural-gas producer, rose 17.7% to $53.57 after EQT Corporation, a larger gas company in the same region, agreed to buy it for stock. Each Range share would be exchanged for 0.987 EQT shares, and Range holders would own about 27% of the combined company, the companies said.
Want more of our stories in Google’s Top Stories? Add etf.net as a preferred source on Google
