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Latest news updates: Brazil accelerates pace of policy tightening with 1.5% interest rate rise

Brazil accelerates pace of policy tightening with 1.5% interest rate rise

Brazil’s central bank has announced its biggest interest rate rise since 2002, ratcheting up a fight against double-digit inflation as investors fear a pre-election government spending splurge.

Latin America’s most populous nation is witnessing some of the sharpest price rises among major economies, driven by factors including higher fuel costs, a weakened exchange rate and a drought that has pushed up energy bills.

The Banco Central do Brasil, or BCB, has taken a hawkish stance and on Wednesday stepped up the pace of tightening.

Its monetary policy committee decided unanimously in favour of a 1.5 percentage point jump, up from 1 percentage point at the previous two meetings, taking the benchmark Selic rate to 7.75 per cent.

The BCB said it foresaw an adjustment of the same magnitude at its next meeting.

Read more on Brazil’s policy decision here.

Ford raises full-year guidance and points to improvement in global chip shortage

Ford’s board of directors voted to reinstate next quarter the dividend the company stopped paying at the start of the pandemic.

The Michigan-based carmaker also raised its full-year guidance for the second time, despite third-quarter declines in revenue and profits.

Ford said it now expects to post earnings before interest and taxes in the range of $10.5bn to $11.5bn. The previous outlook topped out at $10bn.

Ford said semiconductor availability “remains a challenge” in the face of a worldwide shortage, but has improved since the second quarter.

“We’re maximising what we have,” John Lawler, chief financial officer, said.

Revenue fell 5 per cent from the third quarter a year ago to $35.87bn. Adjusted earnings before income and taxes fell nearly 17 per cent to $3bn.

What to watch in Asia today

Central bank news: The Bank of Japan will issue its outlook report for economic activity and prices, plus monthly retail sales figures. It will also announce its monetary policy statement.

Tech earnings: A big day for tech earnings in Asia, with Nokia, Panasonic, Samsung and Sony all reporting.

Tech earnings unable to sustain US stocks at record high

US stock markets slipped back from their record high on Wednesday, as strong earnings reports from technology giants were not enough to offset weakness in the rest of the market.

The benchmark S&P 500 index fell 0.5 per cent from Tuesday’s record close, with tech groups and consumer stocks including Amazon the only sectors that made gains. The tech-heavy Nasdaq Composite was flat.

Energy stocks were the biggest drivers of the declines as oil prices retreated from their recent highs.

Microsoft and Google parent Alphabet were bright spots, jumping 4 per cent and 5 per cent respectively after they smashed analysts’ forecasts with third-quarter results released after the closing bell on Tuesday evening.

The yield on the 10-year US Treasury note dropped 0.07 percentage points to 1.54 per cent.

Elsewhere in North America, the Bank of Canada jolted markets by abruptly ending its bond-buying programme and signalling that it could raise interest rates by the middle of next year, becoming the latest central bank to respond to stubbornly high inflation with a hawkish policy shift.

Canadian two-year government bond yields, which are sensitive to interest rate expectations, jumped 0.21 percentage points to 1.07 per cent. The prospect of higher rates helped the Canadian dollar gain 0.3 per cent against the US dollar to trade at C$1.24.

Read more on the day’s market moves here.


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