Financial Markets

Investors react to Lula’s election victory with a sharp decline in the Brazilian real and concerns over increased spending and fiscal challenges.

Brazil’s real dropped against the United States dollar on the heels of Brazil’s President Luiz Inacio Lula da Silva’s unexpected re-election after right-wing Flavio Bolsonaro, the son of former President Jair Bolsonaro, led in the first round of voting earlier this month.

Brazil’s currency dropped against the dollar by 12 percent in spot trading. Bovespa stock index futures tumbled nearly 15 percent on Monday.

“I’m not surprised the real is sinking sharply; traders are covering their bets that assume a Bolsonaro victory and tighter fiscal policy,” Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, told Al Jazeera.

Brazil’s stock exchange halted trading for 30 minutes. The Bovespa index fell 10 percent from its previous close, triggering a circuit-breaker safety mechanism and reversing a rally earlier this month amid expectations of a shift to the right after Bolsonaro won the first round.

Ziemba says Bolsonaro’s refusal to concede the election has driven some financial uncertainty.

“The market pressure is also amplified by the objections raised by Bolsonaro, but the scale of the victory suggests that the result will stand,” she said.

Interest rate futures had also reflected expectations that tighter fiscal policy under Bolsonaro would allow borrowing costs to decline.

“They [investors] assume more domestic spending and higher rates in Brazil. However, the real is still likely to be supported by strong commodity revenues,” Ziemba noted.

Stocks closed on Friday almost 7 percent above their level before the first round, while the Brazilian real was nearly 5 percent stronger against the US dollar.

Interest rate futures are up 3.1 percent, rising sharply after President Lula’s win. Interest rate futures had previously reflected a tighter fiscal policy amid expectations that Bolsonaro would oust the incumbent and that he would allow borrowing costs to decline.

Lula faces an increase in Brazil’s debt and will be challenged with protecting both social programmes and investment, with investors looking for signs of whether his gradual fiscal approach can bring borrowing costs down.

Lula’s team aims to produce a budget surplus of about 1.3 percent of gross domestic product (GDP) by 2030. That would leave money to cover part of the interest bill, reducing the need for fresh borrowing. But public debt already exceeds 82 percent of GDP, while pensions and other legally required spending limit where savings can come from.

“Lula’s policies have talked about spending cuts, but he has not gone into the details of how that is going to look,” said Divya Singaravelu, head of research at Meridian 1305 Capital.

Attention will now turn to Lula’s choice of finance minister and what it signals about his fiscal approach.

In late August, United States President Donald Trump announced a 90-day pause on certain beef tariffs, making beef cheaper to import, particularly from Brazil.

That decision was framed as a way to bring down prices for consumers, but it landed as a betrayal for many US ranchers, who were getting ready to take their cattle to market.

It is too soon to tell how the decision will ultimately affect grocery prices, but the impact on ranchers was immediate: prices at cattle auctions plummeted, temporarily lowering ranchers’ profits. The United States Cattlemen’s Association, the National Cattlemen’s Beef Association and the Farm Bureau, all member organisations that represent ranchers, opposed the decision.

Rural Republican members of Congress also distanced themselves, but it is not yet clear how ranchers will vote in the midterms — or whether those votes will decide races.

Chad Basinger, a rancher in Pretty Prairie, Kansas, is sceptical that the imports will have a significant impact.

“I know there’s people that have said, ‘Well I’m just gonna vote for the other party’ or ‘I’m not gonna vote’ or ‘This administration’s really let me down’. So yes, there will be people that swing the other way in the midterms. But overall I don’t think it’ll be that much,” Basinger said.

Ranchers will also be weighing the administration’s other actions, Basinger said, such as the $8bn in farm relief announced in Kansas on October 19.

Basinger’s House of Representatives district in Kansas is expected to remain safely Republican in the midterms. But Kansas faces an unexpectedly tight Senate race and ranchers in House districts elsewhere may find themselves closer to the political fray: potential swing districts in Montana, Iowa, Texas and Colorado are all in cattle country.

Still, it is unlikely that ranchers alone will decide elections: ranchers — along with farmers more broadly — represent a shrinking percentage of rural voters and a smaller voting bloc in practice than in the public imagination.

America’s cattle herd is near its smallest size since 1951 and the number of ranchers has declined alongside the number of livestock. Observers worry that ongoing uncertainty fuelled by tariffs, fuel prices and drought may cause the ranching population to shrink further.

David Anderson, an agricultural economist at Texas A&M University who advises ranchers, said that high prices this year should have given ranchers the confidence to invest in the future and expand their herds. Making imports cheaper, however, may have helped nudge ranchers in the opposite direction.

“It really works against the market signal to expand and produce more domestically,” Anderson said. “That got a lot of people pretty angry.”

Tariff changes add volatility

This is not the first time that Trump’s tariffs have impacted cattle supplies. Last year, the president added a 50 percent tariff on Brazil, a key trade partner for beef, raising the cost of importing Brazilian lean beef, which is often mixed with fatty US beef to make hamburger patties, a staple in most homes.

In February, Trump allowed more tariff-free beef imports from Argentina. In August, he did the same for Brazil and Paraguay.

Both tariff changes led to swift price swings in cattle futures markets, which are often volatile in response to the news cycle.

Cattle prices also moved this year in response to more fundamental drivers of supply and demand: plant closures by meatpackers, labour shortages late last month related to ICE actions at Kansas packing plants, the second-largest in the country, and the reopening of the southern border after a closure due to New World screwworm disease.

Big picture, the shrinking US cattle herd has less to do with short-term price changes and more to do with drought cycles, which are growing more intense as warming temperatures increase evaporation.

Still, tariff changes add uncertainty. “This has been a hot topic for the last six weeks,” said Anderson. “It just adds a little more uncertainty or volatility — or worries or stress.”

This year, extra price volatility as many ranchers prepared to sell meant ranchers faced lower profits and more risk.

Basinger says that for many established ranchers, the tariff announcement was frustrating, but not existential.

“People are upset. They have a right to be upset. But they’re not going to change their strategy,” he said. For most ranchers, Basinger said, the imports would not be the biggest factor shaping decisions about their herds this year.

Where price volatility may matter more, Basinger said, is for the next generation. Most of today’s ranchers are eyeing retirement. Their heirs must decide whether to make a go of ranching or sell their family’s land. Other aspiring ranchers are also watching the industry.

“If you’re seeing your dad not make money, or somebody else not make money…it’s not easy work!” Basinger said. “It has to be very enticing for somebody to want to jump in and be like, ‘I’m gonna be a rancher and go break ice in the middle of winter when it’s cold and I could be inside’.”

Record revenue and record costs

This year, low US cattle supplies meant that ranchers commanded record-high cattle prices, despite added imports and other market shifts.

But high revenue doesn’t always mean huge profits: Many ranchers operate at a loss for years in a row. Then, they rely on a few good years to pay down debts or expand their herds.

This year, profits were lower than hoped, because ranchers also faced high costs.

Interest rates on loans are high and the war with Iran meant ranchers paid extra for fuel and fertiliser. A drought across much of America’s ranchland meant they paid more for feed.

In states such as Kansas and Nebraska, ranchers also faced destructive wildfires and aid groups like Farm Rescue coordinated hay donations.

Still, Basinger said, ranchers who raise cows and calves generally did well this year. In Kansas, he is seeing ranchers use profits to make repairs and upgrades. He said this year’s high cattle prices have been helping. “But it needs to help for a little longer to give them more of an edge,” he said.

More of an edge might mean, for example, enough money for bigger purchases, like buying land from a neighbouring ranch to make room for a growing herd.

Rangeland, however, is increasingly expensive. When it is up for sale, outside investors can often pay more than ranchers, which can mean less land for cattle. That’s just one more pressure shrinking the US herd decade after decade.

Ranchers had hoped that 2026 would be a turnaround year. So far, however, “we really don’t have much evidence of herd expansion,” Anderson said.

Tech-heavy Nasdaq falls 2.6 percent as debate rages over whether AI is a bubble.

US tech stocks have dropped sharply amid market jitters over the sustainability of companies’ enormous capital investments in AI.

The Nasdaq Composite, which is dominated by tech firms linked to the AI boom, fell 2.6 percent on Thursday, its steepest fall since the index tumbled 4.2 percent on June 5.

The broader S&P 500 slid 1.21 percent, the benchmark’s biggest drop since a 1.52 percent decline on July 29.

Apart from Apple, each of the “Magnificent 7”, which make up more than one-third of the overall market, saw substantial losses.

Meta dropped nearly 7 percent after it raised its projected capital spending for this year to $135bn to $145bn in its latest earnings report, even as the Facebook parent company’s net profit fell short of expectations.

Amazon fell 4.6 percent, while Nvidia dropped 4.4 percent.

Tesla and Alphabet both fell 3.1 percent, while Microsoft declined 2.2 percent.

Apple rose 1.2 percent.

The sell-off extended to other major tech players, including Intel and Advanced Micro Devices, both of which fell about 8 percent, and Broadcom, which slid 4.3 percent.

Rising oil prices since February, due to the fallout of the US-Israel war on Iran, added to the downbeat mood.

Brent crude futures rose 4 percent on Thursday and continued to climb on Friday morning, taking the international benchmark above $114.20 a barrel, its highest since May.

Stocks slip in Asian trading

Major stock markets in Asia opened lower on Friday, following the losses on Wall Street.

Japan’s benchmark Nikkei 225 fell more than 2 percent in morning trading before recovering some ground, while South Korea’s KOSPI dropped as much as 3.5 percent.

The Hang Seng Index in Hong Kong fell about 0.5 percent.

Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, said the swings in the market appeared to be driven more by sentiment than underlying fundamentals.

“In short, nothing has changed. Investors have just decided to be afraid this week. Everyone I speak to points to a different cause for the downfall … It’s just a giant wall of worry,” Goldberg told Al Jazeera.

“There are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason.”

US tech companies’ huge investments in AI have stoked intense debate about whether a market bubble is forming similar to the one that preceded the 2000 dot-com crash.

While some Wall Street analysts view current levels of investment in datacentres and graphics processing units as unsustainable, others argue that AI will revolutionise society to a degree that justifies the eye-watering sums involved.

Global AI investment is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to technology insights company Gartner.

China is increasing its gold reserves in a bid to reduce its dependence on US dollar assets and protect against financial and geopolitical risks, analysts say, while households are turning to the precious metal amid uncertainty over the domestic economy.

The People’s Bank of China reported buying gold for a 23rd consecutive month in September, when the country’s central bank also made its largest monthly purchase in nearly three years. The sustained buying points to a longer-term effort to spread risk associated with its vast reserves, experts say.

Among concerns is high US debt and Western governments’ freezing of assets, which has highlighted the inherent risk in holding money overseas, particularly for emerging market and Global South economies. Gold bought and stored domestically offers protection against that risk because access does not depend on the will of another government.

But central bank buying and household demand for gold in China have different drivers. While Beijing is managing its financial exposure, private investors are seeking somewhere to preserve their savings. Here is what we know.

How much gold has China bought?

China’s central bank added approximately 23 tonnes of gold in September, bringing its reported holdings to about 2,410 tonnes, according to the World Gold Council. That was its largest monthly purchase since October 2023. Gold accounted for 8.5 percent of China’s total official reserves at the end of September, compared with 5.5 percent at the end of 2024.

Reserves are assets central banks hold to ensure they can meet international payments and respond to financial disruption. They usually include foreign currencies, foreign government debt and gold.

Private demand for gold within China has also risen, with purchases of gold bars and coins 28.4 percent higher in the first half of 2026 than during the same period last year, according to the China Gold Association. The buying of gold has continued amid falling prices, with gold down around 8.5 percent over the month.

The World Gold Council attributed the decline in gold prices partly to a stronger dollar and higher returns on US government debt. With interest rates going up in an attempt to curb inflation, these investments are attractive for buyers as they pay interest, making them more attractive to private investors than gold, which does not.

Why is China buying more gold?

A key objective is to reduce dependence on US government debt, known as Treasuries, according to Thu Lan Nguyen, head of commodity research at Commerzbank in Frankfurt.

China holds substantial reserves in dollar-based assets and, therefore, buying gold reduces its exposure to decisions taken in Washington. “China’s gold purchases are part of a broader effort to make its reserves more resilient,” Nguyen told Al Jazeera.

The freezing by Western countries of roughly $300bn in Russian Central Bank overseas assets following Moscow’s invasion of Ukraine in 2022 demonstrated how reserves held abroad can quickly become inaccessible.

The concern for China may be that a future confrontation with Washington could expose some of its overseas assets to similar restrictions. “Gold held domestically has a crucial advantage in this respect: it does not represent a claim on another country and is therefore much less exposed to sanctions or asset freezes,” Nguyen said.

“I would interpret it primarily as risk management,” she added, pointing to increased geopolitical tensions and economic and fiscal risks.

America’s rising debt, which hit $40 trillion for the first time in history earlier this year, adds another source of uncertainty. In February, the US Congressional Budget Office projected that federal debt held by the public would rise from 101 percent of the size of the US economy in 2026 to 120 percent in 2036. That provides context for concerns about Washington’s ability to repay that debt going forward should an economic crash occur. Much of this debt is held by China. Gold, therefore, offers a less volatile and risky asset to hold.

Chinese households have different motivations for buying gold. When confidence in other investments weakens, gold can become more attractive as a way to hold savings. “Strong demand for gold can partly reflect a search for alternative stores of value,” Nguyen said.

The World Gold Council has identified weak Chinese share markets as one factor supporting domestic demand for gold, while its property market is burdened by heavy borrowing and overbuilding, contributing to a fall in housing prices, making it a poorer investment.

What this means for the US dollar

Analysts warned that China’s increased buying of gold does not signal an imminent end to the dollar’s global dominance. “I would be cautious about describing this as a major shift away from the dollar,” Nguyen said. “The dollar remains by far the dominant global reserve currency.”

But a gradual shift could still matter if China and other central banks put more of their new reserves into gold, buying fewer US assets than they normally would. That could weaken one source of demand for US government debt. But the effect would depend on how widely and quickly the shift developed.

“The key point is, therefore, that this is likely to be a slow diversification process rather than a sudden abandonment of the dollar,” Nguyen said. She added that the consequences for the US economy would remain limited unless the trend broadened and accelerated substantially.

Central banks also need readily available foreign currency to support international payments and the dollar remains central to those transactions. So gold can provide financial protection, but it cannot directly replace all the functions of dollar reserves.

Who else is buying gold?

China is part of a wider trend, particularly among central banks in emerging economies, Nguyen said.

“The trend is particularly visible among emerging market central banks,” Nguyen said. “But sanctions are only part of the story.”

Poland has also become a more prominent buyer. Its central bank purchased 31 tonnes in the first quarter of 2026 and another eight tonnes in July, according to the World Gold Council.

Large holdings do not necessarily indicate recent purchases. India, for example, confirmed in June that its physical gold stock remained unchanged at about 880.5 tonnes. India’s gold reserves have changed little since mid-2025, according to the World Gold Council. It bought about four tonnes in 2025, down from 73 tonnes in 2024.

Despite China’s sustained buying, its reserves remain far smaller than those of the United States. Its holdings of about 2,300 tonnes at the end of 2025 amounted to less than one-third of the US stockpile of approximately 8,133 tonnes.

The United States stock market has hit an all-time high as excitement around artificial intelligence continues to fuel a buying frenzy on Wall Street.

The S&P 500, the benchmark stock index, closed 0.58 percent higher on Tuesday, topping the previous peak reached in mid-August.

The Nasdaq Composite, which is more heavily weighted towards tech stocks, also hit a record high, finishing up 0.45 percent.

Tech stocks were among the top performers, with each of the “Magnificent Seven” apart from Meta closing higher.

Amazon led the pack with a 1.95 percent gain, followed by Microsoft and Tesla, which rose 0.78 percent and 0.51 percent, respectively.

Apple and Alphabet both rose 0.22 percent, while Nvidia gained 0.14 percent.

Meta, which has risen more than 20 percent since the launch last month of its new AI assistant, Muse, fell 0.41 percent.

Other big movers in tech included Marvell Technology, which rose 5.81 percent, and Cisco, which gained 4.54 percent.

Technology, AI

Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services in Atlanta, Georgia, said the market rally should be seen as a “technology and AI surge”.

“Every bull market has a dominant theme, and technology and AI remain this market’s dominant theme,” Lerner told Al Jazeera.

“Technology and communication services were the only two S&P 500 sectors to rise last month, while the other nine declined.”

Wall Street has shrugged off a host of challenges facing the US economy amid hyperscalers’ multibillion-dollar investments in AI.

Despite the energy crunch caused by the US-Israeli war on Iran and a sell-off of US government bonds partly driven by ballooning government debt, the market is well on track to record its fourth consecutive year of double-digit returns.

The S&P 500 has risen 14 percent so far in 2026, while the Nasdaq Composite is up 18.78 percent.

Lerner at Truist Advisory said the market rally had the potential to continue through the end of 2026 given historical trends and expectations for strong corporate earnings.

“We do not expect a straight line higher for markets,” Lerner said.

“Still, the fourth quarter of midterm-election years has produced an average gain of 7 percent and has been positive 84 percent of the time since 1950.”

Lerner said that rising interest rates posed the biggest risk to the upward trend.

“Still, on balance, the weight of the evidence suggests this bull market still has more upside potential,” he said.

Asian stock markets fell on Wednesday, with key indexes in Japan, South Korea and Hong Kong slumping in morning trading.

The Nikkei 225 in Tokyo, Kospi in Seoul and Hang Seng Index in Hong Kong were down 0.79 percent, 1.36 percent and 0.71 percent, respectively, as of 02:30 GMT.

Oil prices, which have been elevated since the start of the war on Iran, rose on Wednesday as traders weighed the fallout of fighting between forces aligned with Yemen’s internationally recognised government and the Iran-aligned Houthis.

Brent crude futures for December delivery stood at $101.45 a barrel as of 02:30 GMT, up 0.87 percent.

Gold hits seven-week low; silver follows suit and records a nearly 5 percent loss.

Gold prices are falling as concerns of rising fuel prices stoke inflation worries on the back of the war between the United States and Iran.

Spot gold prices fell by 3.3 percent to reach a more than seven-week low at $4,146.51 per ounce on Monday.

Rising oil prices, a higher US dollar and Treasury yields stoked inflation concerns, creating further headwinds for the metal.

This is the lowest level for gold values since August 5. US gold futures also fell by 3.3 percent to $4,178.40.

Although gold is traditionally considered an inflation hedge, higher interest rates dent ⁠its appeal as investors prefer yield-bearing assets.

“There might be no notable direct impact on regular people due to that. However, investors who had turned to gold will see a hit, especially under the current high inflation rates,” Sherif Othman, CEO of the Maryland-based Poise Investment Advisors, told Al Jazeera.

“Gold does not yield interest, so when Treasury yields go up, investors turn away from gold, impacting its value”, he added.

The Fed lifted benchmark rates by a quarter ⁠percentage point earlier this month and flagged that at least one more hike is likely in the coming months.

The US dollar was steady near a two-month high, and oil prices spiked about 3 percent as US President Donald Trump rejected an Iranian offer ⁠to resolve the conflict and reopen the Strait of Hormuz.

Such factors triggered several policymakers to warn that inflation risks remain elevated and that interest rates may need to rise, with Cleveland Fed President Beth Hammack among the latest officials to reiterate that view.

Higher Treasury yields and the US dollar are “creating a perfect storm to push the metals prices sharply lower,” according to Jim Wyckoff, a market analyst at American Gold Exchange.

Spot silver also fell by 4.7 percent to $61.27 per ounce, platinum declined 2.9 percent to $1,726.30 and palladium lost 4.4 percent to $1,211.45.