Brazil's markets jump on strong showing by right-wing Bolsonaro

A stronger-than-expected showing for Brazil's far-right President, Jair Bolsonaro, in Sunday's presidential vote appeared to buoy Brazilian markets Monday.

Why it matters: A a powerhouse producer of commodities such as soybeans, iron ore and petroleum, Brazil has Latin America's largest economy and population.

• Its status as the world's fourth-largest democracy, however, has looked increasingly precarious in the run-up to the election.
• Bolsonaro — a former army captain who speaks warmly of the dictatorship that used to run the country — has repeatedly sought to question the legitimacy of the vote, which polls suggested he was likely to lose.

By the numbers: Brazil's benchmark Bovespa stock index jumped over 5%.

• Brazil's currency, the real, rose nearly 5% against the dollar.
• The country's bonds rose too, pushing interest rates, which move in the opposite direction of bond prices, down and lowering the country's borrowing costs.

State of play: Bolsonaro's opponent, the leftist former president Luíz Inácio Lula da Silva, who is known as Lula, took 48.4% of the votes in Sunday's election but was unable to settle the contest in one fell swoop — Bolsonaro fared much better than expected, with 43.2% of the vote.

• Because neither candidate received an outright majority, a runoff vote will be held on Oct. 30, extending the election season in an increasingly polarized country.
• Lula, who served time on corruption and money-laundering charges before his conviction was later thrown out by the Supreme Court, is still considered the front-runner.

Between the lines: Analysts think Bolsonaro's better-than-expected showing — some polls showed him trailing by more than a dozen percentage points — could force Lula to moderate some of his opposition to the deregulation and privatization programs Bolsonaro had pushed.

• Brazilian utility giant Eletrobras — which is majority-owned by the government but the focus of a privatization plan — was one of the best-performing stocks in Brazilian markets Monday.

What they're saying: "Investors may have taken heart from the fact that even before Sunday's results, Lula seemed to be tacking toward the center," wrote Capital Economics analysts in a research note on Monday.

Worth noting: The performance of Brazil's markets on Monday was also influenced by news that OPEC+ was considering a large production cut for crude.

• The news drove oil prices sharply higher and lifted shares of Brazilian oil giant Petrobras by more than 13%.

What we're watching: Any indication that election-related violence could be next. That would, among other things, spook the markets.

• Bolsonaro has repeatedly cast doubt on the possibility that he could be legitimately defeated, holding mass rallies and declaring that "only god" can remove him from office. A closer-than-expected election may increase the odds that he attempts to use force to hold onto power.