Brazilian stocks: Oil giant Petrobras falls after Lula defeats Bolsonaro

Brazilian stocks fell for the most part early on before rebounding Monday after the country’s left-wing former president, Luiz Inácio Lula da Silva, won the second round of the presidential election on Sunday, narrowly beating right-wing president Jair Bolsonaro. Petrobras (PBR) shares fell Monday.


State oil giant Petrobras sank early in the morning amid concerns that Lula will now redirect the company’s capital towards social needs and away from profits and shareholder returns. Petrobras is the largest oil and gas plant in South America, producing approximately 2.7 million barrels of oil equivalent per day. In the second quarter, PBR earnings grew 34% to $1.66 per share, while revenue exploded 65% to $32.8 billion. PBR stocks also have a 46% dividend yield, according to FactSet.

Petrobras shares fell 4.7% to 12.82 during market trading Monday. Petrobras stock is up 75% since the start of the year and had just come out of a very late stage of the cup base. PBR shares fell lower last week, undercutting the base’s 14.85 buy point by more than 8% and triggering the automatic sell rule.

Lula was Brazil’s first president from 2003 to 2010. At that time, Petrobras developed large new oil reserves. Lula plans to keep Petrobras state-owned, while Bolsonaro has pledged to privatize the company. On October 3, when Lula failed to get enough support in the first round of the election, PBR shares skyrocketed.

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

Other Stocks in Brazil

Along with Petrobras stocks, the iShares MSCI Brazil ETF (EWZ) fell 5% early Monday before rising 4%. The Warren Buffett-backed Brazil-based StoneCo (STNE), which provides payment and management tools for customers, previously fell 1.8% before hitting 3.2%.

Digital insurance (PAGS), another Brazil-based company that provides payment technology to small and medium-sized businesses, also fell about 2% before the market opened. However, during trading hours, it rose 3%.

Brazil-based aircraft manufacturer Embraer (ERJ) shot up 7.4% and iron ore mining giant Valley (VALE) rose about 2.4%. The Argentine company Free market (MELI), which provides an online marketplace infrastructure, added 2.25% on Monday.

Follow Kit Norton on Twitter @KitNorton for more coverage.


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