Brazil ETF jumps in Tokyo after Flávio Bolsonaro edges Lula in first round

Flávio Bolsonaro finished ahead of President Luiz Inácio Lula da Silva in Brazil's October 4, 2026 first round, 47.42% to 44.7% of valid votes with 97.36% of ballot boxes counted, forcing an October 25 runoff, as a Japan-listed Brazil stock fund rose 7.6% in early Monday trading.

Brazil's presidential race is going to a runoff, and the candidate investors have been backing finished first. Senator Flávio Bolsonaro of the right-wing Liberal Party took 47.42% of valid votes in Sunday's first round against 44.7% for President Luiz Inácio Lula da Silva, with 97.36% of ballot boxes counted, according to the electoral court tally published by O Globo. Neither cleared the 50% needed to win outright, so the two meet again on October 25.

Markets moved before Brazil's own exchanges could open. A Japan-listed exchange-traded fund that tracks Brazilian stocks rose 7.6% in early Monday trading in Tokyo, Sunday evening in New York, and futures on the real also gained.

Why a first-place finish moved money

The order of finish was the surprise. In the days before the vote, traders in São Paulo broadly expected Lula to finish 2 to 4 percentage points ahead, a result they said was roughly what Brazilian assets were already pricing. A narrower Lula lead, or Flávio finishing in front, was the outcome many expected to set off a Monday rally, and some investors had already positioned for it through options and local interest rates.

That trade has been building since mid-August, when Flávio began gaining in the polls and Brazilian assets started to diverge from a rough global backdrop for bonds. JPMorgan told clients that the MSCI Brazil index rose by 0.25% on average each day Flávio gained in the polls, and it described the currency outcome as bimodal: about 4.90 reais per dollar if he wins the presidency and 5.50 if Lula does.

Investors favor Flávio because he has promised to cut the deficit, and many economists say Brazil needs a lasting fiscal adjustment rather than one-off measures. Lula, 80, is seeking a fourth term on a platform of broad social spending. Flávio, 45, is the eldest son of former President Jair Bolsonaro.

The runoff math is still open

A first-round lead is not a win. The third-, fourth- and fifth-place finishers were all on the right: Augusto Cury took 2.9%, Renan Santos 2.26% and Ronaldo Caiado 2.2% in a later count with 97.97% of ballot boxes reported. That gives Flávio a natural pool to draw from, but Caiado and Santos have said they would not endorse either candidate in the runoff. Early returns also pointed to gains for the right in Congress, particularly the Senate, which would matter for any fiscal agenda a new government tries to pass.

Before Sunday, surveys showed the two men roughly even in a head-to-head runoff. Free campaign advertising on radio and television for the second round starts Friday, October 9, and runs through October 23.