There are less than three weeks left until Brazilian voters decide whether to re-elect the current president, Luiz Inácio Lula da Silva, or to have him removed from power by Flavio Bolsonaro, the son of former president Jair Bolsonaro. Both candidates received the most votes in the first round of voting on Sunday and have advanced to the second round of elections.

However, the results of the first round of voting are recalibrating investors' pricing expectations for the final outcome.

On the prediction market platform Kalshi, speculators currently believe that Jair Bolsonaro has a over 80% chance of winning the presidential election. Before the release of the first-round results on Sunday, his win probability was around 60%. On Polymarket, Bolsonaro's current win probability is 85%, which is a significant increase from 63% before the first-round voting.

Before the first round of voting on Sunday, although Bolsonaro was considered a slight favorite in the presidential election, according to pre-election polls, it was generally expected that he would fall behind the current president, Lula, in the initial counting of votes. Nevertheless, the market was still optimistic about his chances of winning in the second round of runoff elections. However, Bolsonaro managed to secure over 47% of the votes, with his first-round vote share even being nearly 2 percentage points higher than Lula's.

According to the rules of the Brazilian presidential election, if no candidate receives a majority of the votes in the first round, the two candidates with the most votes will proceed to the second round of runoff elections.

After the results were announced, Brazilian assets rose in value.

iShares MSCI Brazil ETF ( EWZ ) rose by more than 12% on Monday. Itaú Unibanco, which is listed in the United States, saw its stock price increase by 15%, while Bradesco Bank soared by 19%. Brazil's local Bovespa index rose by 8%.

Investors generally believe that Bolsonaro is more favorable to the market, as this candidate has promised to strengthen fiscal discipline. In June, Brazil's deficit accounted for nearly 10% of its gross domestic product ( GDP ).

Lula is running for his fourth term as president this time. He regained the presidency in 2022 after being out of office for 12 years and defeated then-current president Jair Bolsonaro. Lula's campaign team has been trying to link Flavio Bolsonaro to his father's actions of questioning the election results after their defeat in 2022, and has portrayed this son as a corrupt individual.

The second round of the Brazilian runoff elections will be held on October 25th.

Disclosure:CNBC has a business relationship with Kalshi, which includes customer acquisition cooperation and a small amount of equity investment.