Lula, Brazil’s 80-year-old president, has won re-election over Flávio Bolsonaro, son of former president Jair Bolsonaro. The result changes his incentives more than his policies. Brazil bars a third consecutive term, so this is Lula’s last campaign. Voters lose their usual leverage over him. The brakes that remain are rules and rivals.

Two brakes matter. The 2023 fiscal framework, written by Lula’s own finance ministry, caps real spending growth at 70% of revenue growth. Congress, where he has never held a dependable majority, trades votes for budget earmarks. Lula gains from loosening the cap. Legislators gain from charging him for it. That bargaining, more than the vote itself, will set the real’s path.

He has been here before. His “Letter to the Brazilian People” of June 2002 pledged to honour Brazil’s debts. The 2003 budget that followed targeted a surplus, before interest payments, of 4.25% of GDP.

The Gist AI Editor

Lula defeats Flávio Bolsonaro, and Brazilian assets sell off

According to the WSJ, 80-year-old President Lula won re-election against Flávio Bolsonaro, an outcome the paper calls an upset. Currency futures and exchange-traded funds that track Brazilian stocks fell sharply in Asian trading, the WSJ reports. Investors had priced in a different winner, so they are now repricing the real and local shares. A weaker real raises the cost of imported fuel, food and machinery for Brazilian firms and households. It also makes Lula’s spending plans harder to fund.

Asian stocks slip as oil holds near multimonth highs

The WSJ reports that Asian equities fell as appetite for risky assets faded. Oil stayed near its highest levels in months. Traders are waiting for the Federal Reserve’s interest-rate decision. That decision sets the cost of dollar borrowing worldwide. Higher oil prices keep inflation elevated, which gives the Fed less room to cut rates.

SK Hynix leveraged funds closed months after launch

Bloomberg reports that two leveraged US funds tied to SK Hynix will be liquidated just months after they debuted. These funds amplify the daily moves of a single stock. Their closure shows that investor demand for the AI chip trade is cooling. Issuers lose fee income, and the memory-chip maker loses a source of speculative buying.

Toyota and Bon Secours make long-horizon bets

The FT reports that Toyota is turning 20 years of robotics research into commercial humanoid robots, competing with Tesla and Chinese makers. Separately, the FT says not-for-profit Bon Secours is nearing a $6bn takeover of Bain-backed Surgery Partners. Taken together, the two stories show capital moving toward owners of long-term assets. Private equity is exiting healthcare, and a Japanese manufacturer is trying to turn old research into a product.

Stay tuned for the next Gist—your edge in a shifting world. The Gist remains independent and reader-supported. If you value news free from corporate or state interests, consider supporting our mission with a donation.

Lula Clings to Power in Brazil Election Upset
— Wall Street Journal

Asian Stocks Decline as Appetite for Risky Assets Ebbs
— Wall Street Journal

Frances Lee on American elections
— Marginalrevolution

Brazil’s Surprise Election Outcome Set to Batter Stocks, Real
— Wall Street Journal

Bon Secours nears $6bn takeover of Bain-backed Surgery Partners
— Financial Times

Toyota takes on Tesla and China in humanoid robot race
— Financial Times

Berlin moves to cap housing expropriation before it starts

Interior Minister Alexander Dobrindt published draft outline points on Sunday for a federal investment protection law. It would allow the “socialisation” (forced transfer to public ownership) of rental housing only if strict necessity tests are met (ZDF). The target is the plan by Berlin’s Left party to take over large landlords. Beneficiaries are institutional owners, whose asset values and borrowing terms depend on legal certainty. Berlin’s city government loses its main lever. Housing policy would shift toward subsidies and building permits.

France’s protests meet a budget with no room

Hundreds of thousands of people marched over two weekends, demanding higher teacher pay, repaired schools and help with living costs (Politico). Each concession raises borrowing needs, and higher borrowing costs then cut the money available for the next concession. With a presidential election ahead, parties gain more from promising spending than from restraint. Bond investors are the other group with leverage.

German firms pass on energy costs

The ifo price expectations index, which tracks the share of firms planning price rises, reached 22.7 points in September from 21.4 in August (ifo). Gas and power prices hit their highest since late 2022 in mid-September, after the Bab al-Mandab strait was blocked. Ifo expects inflation above 3% in coming months, with utilities raising household tariffs in winter. Energy producers gain, while retailers and households carry the cost.

Non-obvious angle: Europe funds research that US startups monetise

Ifo president Clemens Fuest and more than 50 scientists argue in Science that European-funded research often ends up in patents held by US startups (ifo). Their proposal is to direct grants toward projects with a path to market. The returns currently accrue to American investors.

Burnham reaches 100 days

Labour MPs are upbeat about Prime Minister Andy Burnham’s first 100 days, though they warn of hurdles ahead (Politico).

Catch the next Gist for the continent’s moving pieces.

Dobrindt plant hohe Hürden für Vergesellschaftungen
— ZDF

France: The sickest man of Europe
— Politico Europe

Höhere Energiepreise werden zunehmend weitergegeben
— IFO

Europäische Forschung wird noch zu häufig in den USA zu Geld gemacht
— IFO

Frank Elderson: Taking action for nature – investing in economic resilience and prosperity
— European Central Bank

Home-Gym für die kleine Wohnung: Was man wirklich braucht
— ZDF