Brazil Stocks Crash 19% Overnight: EWZ Plunges as Lula's Shock Win Unwinds the Bolsonaro Trade

Brazilian stocks crashed in overnight U.S. trading on Sunday, October 25, 2026, after President Luiz Inácio Lula da Silva narrowly won re-election — the iShares MSCI Brazil ETF (EWZ) plunged about 19%, Petrobras fell about 11% and Nu Holdings dropped more than 12% as the market's heavily favored "Bolsonaro trade" unwound in hours.

What Happened

Brazil's electoral court declared Lula mathematically elected on Sunday night after a runoff count that swung back and forth all evening. With about 99.9% of polling sections counted, Lula had roughly 51.8% of valid votes against about 48.2% for Senator Flávio Bolsonaro — a margin of more than 4 million votes. The win makes the 80-year-old Lula the first person elected president of Brazil four times, following his victories in 2002, 2006 and 2022.

It was also a historic comeback. Lula finished second in the October 4 first round, with 45.16% to Bolsonaro's 47.03%. Since direct presidential elections resumed in 1989, every runoff had previously been won by the candidate who finished first in the opening round. Prediction markets and late polls had leaned the other way, with bettors giving Bolsonaro odds above 80% before the runoff — which is exactly why the market reaction was so violent.

The Overnight Damage, Name by Name

EWZ, the main U.S.-listed fund tracking large and mid-cap Brazilian stocks, fell as much as 19.63% in after-hours trading to $34.23, down from its Friday regular close of $42.59, and was still down about 18-19% late Sunday night. Among U.S.-listed Brazilian names, state oil giant Petrobras slid about 11-12%, digital bank Nu Holdings plunged more than 12%, Itaú Unibanco dropped about 13.7%, Bradesco fell about 12.3%, miner Vale lost about 4.4%, and MercadoLibre — whose biggest market is Brazil — slumped about 5%. The selling was global: a Tokyo-listed Brazilian ETF sank 12.75% in early Monday trading in Japan.

One caution belongs on every one of those numbers: Sunday-night overnight trading is thin, and thin markets exaggerate moves. The percentages traders wake up to on Monday may differ — in either direction — once São Paulo's B3 exchange and full U.S. volume open. What is not in doubt is the direction and the scale of the repricing.

Why It's Blowing Up: The Trade That Reversed

Markets had spent three weeks pricing in a Bolsonaro win. After his stronger-than-expected first round, EWZ soared 12.5% on October 5 to its highest level since February 2020, the Ibovespa jumped nearly 8% to a record above 200,000 points, XP rocketed 39.1% in a day, Itaú vaulted 15.5% and Petrobras gained 11.5%. Investors viewed Bolsonaro as the more market-friendly candidate, favoring stricter fiscal policy and lower corporate taxes.

Sunday night unwound that entire bet at once. Reporting on the selloff pointed to fresh concerns about political and economic uncertainty under a fourth Lula term — including what it means for Brazil's interest rates, its currency, and a public debt load around 83% of GDP. Pre-runoff desk estimates had suggested a Lula win could push the dollar toward 5.30-5.50 Brazilian reais, versus 4.70-4.90 in a Bolsonaro scenario. State-linked names like Petrobras, which are most exposed to government policy, were hit hardest alongside the banks.

Key Facts

The result: Lula about 51.8% vs. Bolsonaro about 48.2% of valid votes, with about 99.9% of sections counted; Lula sworn in January 5, 2027, for a term running to 2030.
The ETF move: EWZ down roughly 18-19% Sunday night, from a $42.59 Friday close to as low as $34.23 after hours.
The biggest losers: Itaú about -13.7%, Bradesco about -12.3%, Nu more than -12%, Petrobras about -11 to -12%, Vale about -4.4%.
The reversal: the same stocks had surged on October 5 — EWZ +12.5%, XP +39.1% — after Bolsonaro led the first round.
The surprise: prediction markets had Bolsonaro above 80% to win; polls showed him ahead by 1-2 points.

What's Next

Monday is the real test: the B3 open in São Paulo, the Brazilian real's first full session, and regular-hours U.S. trading will show how much of Sunday night's plunge was thin-market panic and how much sticks. Investors will also watch Lula's first economic signals — cabinet and finance-team names, and any statement on fiscal policy — because the selloff was driven less by the result itself than by uncertainty about what a fourth term means for spending, rates and state companies. A Congress where Bolsonaro's Liberal Party holds the largest bench will shape how much of any agenda can actually pass. This post reports market moves and reactions only; it is not financial advice.

FAQ

Why did Brazil stocks crash after Lula won?

Markets had priced in a Bolsonaro victory — seen as more fiscally strict and market-friendly — after he led the first round. Lula's surprise comeback forced a rapid unwind of that trade, on concerns about fiscal policy, interest rates and the currency under a fourth Lula term.

How much did the EWZ Brazil ETF fall?

EWZ fell about 18-19% in Sunday-night U.S. trading, dropping as low as $34.23 after hours from its $42.59 Friday close. Overnight trading is thin, so Monday's regular session may settle at a different level.

Which Brazilian stocks fell the most?

Banks and state-linked names led the drop: Itaú fell about 13.7%, Bradesco about 12.3%, Nu Holdings more than 12%, and Petrobras about 11-12%. Vale fell about 4.4% and MercadoLibre about 5%.

What was the final election result?

With about 99.9% of polling sections counted, Lula won about 51.8% of valid votes to Flávio Bolsonaro's 48.2% — making Lula the first person elected president of Brazil four times.