Brazil Stocks: Oil Giant Petrobras Falls After Lula Beats Bolsonaro

Brazil stocks dropped broadly early Monday after the country’s leftist former president, Luiz Inácio Lula da Silva won Sunday’s runoff presidential election, narrowly defeating right-wing President Jair Bolsonaro. Petrobras (PBR) stock tumbled Monday morning.

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State-owned oil giant Petrobras sank early in the morning amid concerns Lula will now redirect the company’s capital toward social needs and away from profit and shareholder returns. Petrobras is the largest oil and gas outfit in South America, producing around 2.7 million barrels of oil equivalent per day. In Q2, PBR earnings grew 34% to $1.66 per share while revenue exploded 65% to $32.8 billion. Petrobras stock also has a dividend yield of 46%, according to FactSet.

Petrobras stock sank nearly 7% early Monday ahead of market trading. On Friday, shares closed at 13.45. Petrobras stock is up 75% since the start of the year, and had just broken out from a very late-stage cup base. PBR shares reversed lower last week, undercutting the base’s 14.85 buy point by more than 8% and triggering the automatic sell rule.

Lula fist served as president of Brazil from 2003-2010. During that time, Petrobras developed large new oil reserves. Lula intends to keep Petrobras state-owned while Bolsonaro had signaled he would privatize the company. On Oct. 3, with Lula failing to receive enough support in the first round of the election, PBR shares shot up.

Reuters reported Friday that Lula now plans to introduce expansive environmental and climate change legislation. Lula’s proposals include reforms to Brazil’s tax code with the goal of pushing the country toward a more climate-friendly economy.

Other Brazil Stocks

Along with Petrobras stock, the iShares MSCI Brazil ETF (EWZ) plunged 5% early Monday as the Warren Buffett-backed Brazil-based StoneCo (STNE), which provides payment and management tools for clients, sank 1.8%.

PagSeguro Digital (PAGS), another Brazil-based company that provides payment technology to small and midsize businesses, dropped around 2% in the early morning

Brazil-based aircraft manufacturer Embraer (ERJ) fell 1.7% and iron-ore mining giant Vale (VALE) edged down 2.5%. The Argentina company MercadoLibre (MELI), which provides online marketplace infrastructure, dropped 1.3% Monday.

Please follow Kit Norton on Twitter @KitNorton for more coverage.

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