Lula's election victory causes investment banks to change course; Morgan Stanley downgrades Brazilian stock market rating.

After Brazilian President Lula unexpectedly won re-election, Morgan Stanley downgraded the country's stock market rating from "overweight" to "equal-weight," believing that the prospect of a shift in economic policy is slim. "Brazil may face an increasingly challenging macroeconomic situation: currency depreciation, rising interest rates, an economic slowdown, and an urgent need for fiscal rebalancing that it cannot achieve," strategists including Nikolaj Lippmann wrote in a research note on Monday.