São Paulo Stock Exchange suspends trading after Lula's victory

The re-election of Luiz Inácio Lula da Silva to the presidency of Brazil produced an immediate and violent reaction on the country’s financial markets. According to data reported by MilanoFinanza, the Bovespa stock index plunged 15.6% after the incumbent president’s victory in Sunday’s runoff, while the real weakened sharply against the dollar.

The scale of the decline prompted the Brazilian stock exchange to activate the automatic trading suspension mechanism, known as the circuit breaker, which temporarily halts trading in shares, derivatives and private debt securities. According to the newspaper Folha de S.Paulo, this is the first use of the tool since March 2020: a suspension that had not been seen in over six years on the São Paulo market.

The suspension kicked in on Monday, October 26, the day after the vote that gave Lula 51.78% of support (64,241,049 votes) against 48.22% for Flávio Bolsonaro (59,818,719 votes), with 99.98% of ballots counted according to data from the Tribunal Superior Eleitoral released by O Globo. Abstentions stood at 19.22% and null votes at 2.12%.

The circuit breaker, as described by Folha de S.Paulo, does not close trading definitively but temporarily suspends operations on shares, derivative instruments and private debt securities, until market conditions stabilize enough to allow trading to resume. It is a mechanism designed to contain the sharpest sell-offs, not to prevent them.

It remains to be seen in the coming sessions whether the Bovespa’s decline and the weakening of the real will be confirmed or whether markets will absorb the news of the re-election. For now, the only available data is from Monday: a 15.6% crash and the first trading suspension since March 2020.