Brazil’s Election Rally & Are EVs Back?

0:00JPMorgan has teams to support you at every stage of your growth. As former founders who have worked in local markets themselves, the bankers at JPMorgan bring deep sector knowledge and lived experience to their clients. JPMorgan can help you navigate complexity with confidence, backed by real world insights and an entrepreneurial perspective. Get what your startup needs now at jpmorgan.com slash grow without limits. JPMorgan is the bank of the Innovation Economy. Our high gas prices fueling and EV come back. We dig into Tesla's latest delivery numbers. And why are Brazilian stocks surging after a surprise first round election results? From Monday, October 5th, it's Brumarket's daily, I'm John Cretot. And I'm Kayla Lopez, let's get moving and grooving. Alright, Kayla, thank you so much for being here in the studio today. We're going to get into the news of the day. But tell us a little bit about yourself and we'll get into the stories.

1:01Yeah, John, I thank you so much for having me. I'm so excited to be here hosting Brumarkets for the first time. I am the co-host of per my last email, which is Morning Brew's work life podcast. So I'm not unfamiliar with the podcasting studio, but I am extremely excited to be here. Alright, well, thank you for joining us today. And Kayla, cast your memory back to this time last year, if you would. Otoni was pitching and hitting for the Dodgers and the playoffs. The government had just shut down and would remain closed for yet another month. Gas was around three bucks a gallon and Tesla was coming off its best quarter ever, delivering nearly half a million electric cars. Why? Well, the clock had been ticking on the $7,500 federal EV tax credit that Biden era incentive that expired at the last of September. So buyers rushed into ticket advantage of the credit. EVs hit nearly 11% of US car sales that quarter, which was an all time high. Then the credit expired on October 1st and sales dropped. Yes, then came months of headlines that American car makers were pulling out of EVs.

2:06It was the narrative of the winter. GM had planned for catalog to sell only electric vehicles by the end of the decade. And now CEO Mary Barra says gas powered catalogs are coming back starting next spring. And the company booked $11 billion in EV related charges since last year. It's been an expensive shift. A very expensive walk back from the EV plans and the impact was even larger at Ford. In December, the company announced it was scaling back EV production and reallocating capital to make its division financially viable and aligned with actual market demand. That was the wording out of the company. Ford canceled three planned EVs and ended production of the F-150 Lightning. I remember that with taking a 19 and a half billion dollar charge, which is going to come over the next several quarters on their balance sheet. You mentioned Tesla, even they were feeling the pinch. US sales dropped 16% through August and Musk even killed the Model S and Model X to open up factory space for Optimus robot manufacturing.

3:06Right, exactly. Maybe fewer electric cars, maybe more of those robots. Then it all changed with the war in Iran. Oil jumped to over $100 a barrel. It's still at about $102 today. And gas is currently at $4.40 over a dollar more than we were talking about last year. September that just wrapped up was the highest average September for gas prices on record. So okay, do you drive? Yeah, I do. I have a car and I drive a bit, but I live in the city, which means I don't drive as much as I do spend time parking. Right, exactly. Opposite side of the street for... Exactly. I saw this morning a report by Nikae Asia that worldwide, for the first time ever, gasoline only cars accounted for less than half of global new cars sales. 49% for the first six months this year. Right. So for the first time worldwide, there were fewer new gas powered cars sold than electric or hybrid. Gas only sales dropped 10%. And that 51% also includes hybrids, like I said.

4:07But that's globally. The US is effectively shut out imports of Chinese EVs. And we are at about 6% EV penetration here domestically. So might these high gas prices fuel a domestic EV comeback? That's the speculation today in all of the headlines. Well, the demand might be there. Dealer EV inventory went from about 180 days of supply earlier this year to 78 days in August. Hyundai's North American CEO says dealers are asking for more EVs. Bakedla. He says Hyundai isn't planning to boost production because, quote, this thing could change again tomorrow. There could be another incentive. There could be another government or administration come in that can change the incentives. We've seen the price of oil jump and fall with each story out of the straight up, from moves, different signaling from the White House and stockpile releases. So I think it's still a volatile situation. Definitely, but maybe the head share is the hybrid. Those are selling well. Toyota's electrified lineup, which leans heavily on hybrids, was up over 28%.

5:08And now accounts for 57% of all of Toyota's US sales. And sales of Hyundai hybrids are also up 39%. And if we're going through the car list, Honda also sold a record number of hybrids last quarter. Okay, so I don't think that EVs are back, pure electric vehicles. Tesla did report third quarter delivering numbers last Friday. All eyes were there. And the headlines were mixed on how to read the numbers because deliveries beat expectations. So that was good news for Tesla. But they were down year over year. Yes, but you've already pointed out that last year's numbers were inflated because of the run up ahead of the tax credit expiration. Right, so you're not comparing apples to apples in that case. Also, Tesla didn't break out US sales from their global numbers. So it's unknown how steep the decline was specifically here in the United States. Nonetheless, Tesla's share of the EV market is 52% this year up from 43% last year. But that's mostly because competition is shrinking. If you've got Ford and GM making fewer electric vehicles, of course,

6:09Tesla is going to take up more market share. Either way, investors saw that number as positive shares in Tesla rose 5% last Friday with those delivery numbers up another 2% so far today. And we'll get a better understanding when Tesla reports full third quarter earnings later this month on the 21st. And who knows, maybe by then Elon will announce that Tesla is being folded into SpaceX. Every day, I look to see if there are signs of that. Well, in a moment, we explore why Brazil's election is sending some stocks, soaring, and how the rally is spilling into Wall Street. But first, this episode is brought to you by Charles Schwab. When it comes to trading, we all know that the click is the smallest part of the whole thing. It's the hours before it, the chart work, the notes, the what's my risk, what's my exit stuff. And then there's all the reviewing when it doesn't exactly go how you drew it up. That's what Schwab trading is built around. Think or swim, trading platforms give you the tools to go deeper, the education tailored to your level. And the trade desk full of real trading specialists you can talk to you day or night. If that sounds like more of what you're going for, go to Schwab.com slash trading and

7:13learn more. All right, Brazil's election ended in a runoff on Sunday, but markets are moving on the news. The country known for Havoyana flip-lops and soccer stars ended round one of its hotly contested presidential election in basically a technical tie with right wing senator Flavio Bolsonaro at eking out 47% of the vote and current president Lula De Silva trailing at about 45.2%. That's right. And according to Bloomberg, this is the narrowest first round margin between the top two candidates in any presidential election since Brazil returned to direct elections in 1989, just a 1.87% percentage point difference between the two candidates. But there are signs that Bolsonaro is going to win this. One, most votes from the eliminated challengers are expected to head to Bolsonaro. And two, the leading candidate in every election in Brazil in the first round has gone onto when the presidency. So Kayla, what are the markets saying? Well, while the race moves to a runoff between the two candidates on October 25th, markets

8:16are reacting as if Bolsonaro won because of the signs that you pointed to. The Brazilian currency, the Raiol, has strengthened about 4.3% on the news, now just under five reais per US dollar. John, I actually lived in Brazil for about a year over a decade ago. And I remember when it was just about three reais per dollar. And even though the currency is a little stronger today, it may still be a good time to book a trip to Rio. Yes, and I recommend that. Just, I wasn't there for as long as you, but I was in Brazil for about 10 weeks. I mean, anything. Several years ago. And it was the same realtor dollar three to one ratio that you're talking about. And I've never eaten better in my life. Affordable Brazilian Trasco, the beef, I still dream about it. I know. It was really lovely. And Brazil's market index, Ibo Vespa, has actually agreed with you, jumping about 9% on the news, which is actually the most that the index has increased since March 2020. And this of course impacts Brazil's markets, but it's also hitting US stock markets as well.

9:16Yes, it is. So the US listed, I shares MSCI Brazil ETF is up more than 13% on the news with Bloomberg reporting that several investors and analysts are actually seeing room for the rally to continue in future days. And interestingly, the MSCI emerging markets index also moved on the news, which is something that Bloomberg pointed out doesn't typically happen during US hours. Since the biggest waiting on that index is Asia and Asian companies. So it's not super common to see big swings during our market hours. Also, Makato Leveray, a Latin American e-commerce marketplace, is up really 10% today on the NASDAQ as Brazil is responsible for more than half of that company's revenue. And to anyone who loves to hear and bury interview interesting guests over on today's sister podcast after earnings and is actually speaking to the CFO of Makato Leveray. It was a total coincidence. Lucky how that happened. Exactly. You can check that episode out now. And another company, New Bank, a Fintech listed on the New York Stock Exchange, is up 14%

10:18today on the news because it's given 118 million Brazilian customers. So Kayla, why is this happening? Yeah, so let's go back to the election. Flavio Bolsonaro is the surprise current front runner in the presidential race. And he touts more conservative free market policies and has promised some fiscal reforms like reduced public spending or tackling the currently high public debt or interest rates. But important to note, he is the son of previous president, Giair Bolsonaro, who was convicted of plotting a coup against current president, Lulid de Silva, after losing the last election. Flavio has spent some time in his campaign distancing himself from his father. He is kind of walking that line of maybe some similar policies. I can imagine. And when for Bolsonaro would also represent a big win for president Donald Trump as the Trump administration aims to improve relations with the largest country in Latin America. After those relations faltered during the Lulid administration, in July, the Trump administration imposed 25% tariffs on certain Brazilian goods, citing unfair trading practices.

11:23Notably, some of the exemptions included beef, coffee, and aircraft parts. Yes, I am not surprised that beef was included in that list of exceptions since Brazil is the world's largest exporter of beef. Reaching record highs in the first half of 2026, Brazil exported 1.7 million metric tons of beef, reaching almost $10 billion in revenue, which is up 36% year over year. That's a lot of cows. One of the major importers unsurprisingly is the U.S., which sits at number two on the list of biggest buyers of Brazilian beef, say that five times fast, bringing in 205,000 tons of this stuff in the first half. Beef has been a hot topic of late with inflation. The U.S. beef and wheel prices have been up nearly 6% in August, as the U.S. cattle inventory dropped to its lowest level in 70 years after multi-year droughts. In August, the U.S. temporarily permitted the import of additional 300,000 tons of discounted beef trimmings. I just want to point out, not all beef is created the same. We're talking about metric tons of beef, but beef trimmings, not exactly the prime that

12:28you might want on your plate. That's sourced primarily from Argentina and Brazil. But concerns around food safety and opposition from U.S. cattle industry groups may mean this agreement a short-lived, that renewed relations between the U.S. and Brazil may change that. There's a lot hanging on this election. I hate to make it all about the Brazilian beef, but I will follow this election for at least that reason. Mmm. Alright. Let's take a quick break. When we come back, have memory prices finally peaked? We look at the numbers. Have you heard of the pod by 8-Sleep? It's not just any pod. It's pod 6. 8-Sleep's latest innovation to the smart mattress cover that goes on top of your existing mattress is now 50% smaller than the previous generation. It's 9 times more sensors and more powerful, active heating and cooling. All summer long, I was drifting off to sleep at the perfect temperature. And the best part? Separate controls for each side of the bed. That's my wife's favorite part too. Members see up to 34% more deep sleep, HRV up 13% on average, and resting heart rate

13:33down 2.3 BPM. No wearables required. Use code Brue Markets at 8Sleep.com slash Brue Markets. The pod 6 starts at $1,999 and you can have 39 to try it at home. A lot of investors are rethinking what diversification looks like right now. More than are thinking about where Bitcoin fits in a broader portfolio too. Not as a short-term trade, but as long-term exposure to an asset that behaves differently from traditional markets. Cash app makes that kind of Bitcoin strategy more straightforward. You can buy Bitcoin directly in the app, set up recurring purchases, or make larger buys when it makes sense for you. And with zero fees and zero spread on automatic purchases like auto-invest, roundups, and paid-in Bitcoin, more of your money goes toward Bitcoin. For a limited time, new customers can get $10 added to their balance. Just use code Bitcoin 10 when you sign up and send at least $5 to a friend in the first two weeks. Terms apply. Download Cash app today. Visit our link in podcast description. All right, welcome back, and Kayla with Apologies to Bob Hope.

14:37The AI build out is saying, thanks for the memory. We'll take all you can produce. And the last week brought us large swings and share price for both AI native memory companies, along with the legacy memory and storage names that I grew up with. And investors are asking if supply has finally caught up to that AI demand. Let's start with micron. Last week, micron reported $54 billion in revenue for their most recent quarter. And that revenue was up 379% from the previous year with an 87% gross margin, just a bang-out quarter. And micron stock, ticker, MU is up 275%. So far this year. So then, wire shares in micron down today. All year, we've heard about constraints and memory supply have kept prices soaring, triple what they were a year ago. And the effect has been bleeding out from data center builds, running up the price of cell phones and PCs. Yeah, the question that I think investors are asking is, have memory prices peaked?

15:37Have we seen peak memory price is supply catching up? And just a quick reminder about the memory that micron sells. D-RAM is the short-term memory that computers and AI hardware used to run active tasks. That's three quarters of micron's revenue. The other kind, NAND Flash is longer term storage. That's not that important except you can see when their competitors come in and who they're competing against. Looking forward, analysts are predicting that D-RAM and NAND prices could rise another 15 to 20% in the fourth quarter. So some analysts will see movement there. Prices keep climbing, even as like you mentioned, the higher prices for PC and smartphones have weakened consumer demand there. It's a lot of acronyms to keep track of. Micron's own CEO is also not worried about softening demand for memory. He expects fiscal 2027 to top 2026 with supply and demand conditions much tighter going forward. And on the earnings call, he told analysts he doesn't have a quote line of sites to the two balancing. Yeah, and he has contracts to back that up.

16:37Micron has 26 long-term deals covering about 35% of revenue through 2030. Nonetheless, some investors think memory prices are near a peak because the price increases are technically getting smaller, even though they're still going up, still increasing. Also, new supply is coming on board. Hello, Toshiba. We'll talk about that in one moment. But if you're really looking for a crack, this was the best I could do in my research today. Micron did guide next quarter's gross margin to 86% that's down from 87. So maybe a little bit of a crack. Small shifts here. Let's wrap up with two memory companies that were traditionally in the home electronics space and who have made major moves into AI build out, Cgate and Western Digital. Let's start with Cgate. So Cgate's data center revenue went from 12% last year to 38% now, which is obviously a huge increase. So they're very busy in the AI space. And Western Digital, that company made those external spinning hard drives. I used to plug into my PC when I was in high school.

17:39They now get 89% of their revenue from AI and cloud computing. So if they're in the AI build out race, why did both of these legacy storage companies see their share price drop 12% last Friday? Cgate was down. Western Digital was down. And it was because of an announcement that rival to Shiba plans to double its AI data center hard drive capacity in fiscal 2027 double. The market had a swift reaction that maybe supply might be catching up with demand. Double digit percentage drops last week. But today, investors bought the dip. Analysts acknowledge that to Shiba's build out will take some time and that the impact won't arrive until 2028. Yeah, we've seen this boom and bust with all of these data center components with chips and memory. There's supply. There's demand. You have to build out these manufacturing facilities that takes years. And then you hope the demand is there once the product comes off the assembly line. Shares in Western Digital, ticker WDC did bounce back. Investors bought that dip up 6% today and shares in Cgate ticker STX rebounded over 4%.

18:45It's 4 PM on the East Coast. The markets have wrapped up for the day. Let's throw it over to John for the numbers. Speaking off a relatively quiet week, STX gained ground before the upcoming earnings season kickoff with the S&P 500 finishing up 7.10 of a percent. The doubt finishing up 2.10s and the NASDAQ finishing up 1% for the day, hitting a new record high boosted by Nvidia, which also traded at record highs today. And two quick headlines just to wrap things up on a Monday. Shares in Freightbrook or RX-O jumped more than 20% today. On news that CH Robinson will acquire the company in about a $5.8 billion deal. CH Robinson says combined in the two businesses will create a more comprehensive offering for customers across a larger and denser network. But CH Robinson investors aren't quite sold on the synergy. Shares in the logistics, giant trading, roughly 10% lower on the news. And finally over in healthcare, shares of GE Healthcare gained around 2% today after announcing plans to acquire Sophie Biosciences for nearly $1 billion.

19:50Sophie produces radio pharmaceutical tracers that help doctors visualize tumors and other areas of the body during PET scans. The acquisition comes as GE Healthcare continues to grow its pharmaceutical, diagnostics, business, the division generated nearly $3 billion in revenue last year. That's all for today's brew market, Staley. And brew market, Staley's hosted by John Coutot and Kayla Lopez. Thank you, Kayla. This by John Coutot, Taco Bellatif, Ivan Loroia, and Emily Millarne. Technical direction by Yucena Wauugu, Brittany Tato is often our audio engineer. Check out the brew market's newsletter and tune in tomorrow to Neil and Toby on the Morning Brew Daily Podcast. We'll see you back here tomorrow. This episode is brought to you by Born in Roma Fregrances by Valentino Beauty. Be iconic fragrance duo. Donna Born in Roma O'Dopparfum is a feminine fragrance featuring juicy black current, central jasmine, woody cashmurren, and warm vanilla.

20:52Its masculine counterpart, Womow Born in Roma O'Dopparlet, has notes of fresh violet leaf, aromatic sage, green vetiver, spicy ginger, and mineral salt. Shop at Macy's.com