Luiz Inácio Lula da Silva's surprise re-election as Brazil's president on Sunday prompted a sharp market reaction — and showed the tightrope he must walk between pleasing his grassroots base and nervous investors who could fuel a fiscal crisis.
The country's benchmark stock index tumbled 13.9% on Monday, the sharpest daily decline since the start of the COVID-19 pandemic, and the Brazilian real fell nearly 8% against the U.S. dollar, the most since 1999.
The yield on Brazil's 10-year government bond rose 2.46 percentage points to its highest level in more than a decade.
The moves wiped out a rally in Brazilian assets that followed Flávio Bolsonaro, seen as the more market-friendly and fiscally disciplined of the candidates, winning the first-round vote in early October.
Lula, who has been in office since Jan. 1, 2023 and was president before from 2003 to 2011, now faces a host of challenges, including a heavily right-wing Congress opposed to many of his policies and hostility from the White House.