Brazilians vote Sunday in a presidential race between incumbent Lula and challenger Flavio Bolsonaro, with a runoff on October 25 likely. Investors are focused less on the outcome itself than on Brazil's fiscal trajectory, while Israel, the US, and New Zealand head toward their own market-moving elections this quarter.
Brazil's voters head to the polls Sunday in a tightly contested presidential race between President Luiz Inácio Lula da Silva and right-wing challenger Flavio Bolsonaro, the son of former President Jair Bolsonaro. Polls show the two running neck-and-neck, making an October 25 runoff likely.
Fiscal risk overshadows the vote
Flavio has sought to capitalise on cost-of-living concerns. Investors are broadly positive about Brazil, but fiscal worries, underpinned by rising spending, remain the main issue for markets. Ninety One portfolio manager Christine Reed said "Fiscal fundamentals are the most concerning risk of a potential Lula re-election", adding that current bond spreads do not price in that risk.
Only a small share of Brazil's budget is discretionary, meaning any lasting fiscal adjustment would have to reach pensions, payrolls, or social benefits. Capital Economics estimates a Flavio win could lift equities between 10% and 20% and pull local currency bond yields lower, while a Lula victory could lead to equity underperformance.
A packed global election calendar
Brazil is one of roughly 40 elections worldwide this year that could move financial markets. Israeli voters choose the 120-seat Knesset on October 27, with polls pointing to a defeat for Prime Minister Benjamin Netanyahu, though no party has ever won an outright majority there. The US holds midterm elections on November 3 amid record diesel prices and rising borrowing costs that have pushed up mortgage rates, with control of Congress at stake for the remainder of President Donald Trump's term.
New Zealand follows on November 7, where opinion polls suggest Prime Minister Christopher Luxon's coalition could lose power, raising the prospect of a redefined mandate for the country's central bank.
Source: Investing.com (Reuters)
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