Economy

Speaking at an event hosted by Itau on the sidelines of the IMF and World Bank annual meetings, Campos Neto said worries about the U.S. inflation outlook were heightened by growing market bets that Republican Donald Trump would beat Democrat Kamala Harris.He said both U.S. campaigns include fiscal expansion elements. Proposals for protectionism and shifts in immigration policy also could have inflationary implications, he added.Regarding Brazilian inflation, he said the latest figure was marginally worse, but called the government’s announcement on Friday of lower energy tariffs in November good news that led many economists to revise estimates. Consumer prices reached 4.47% in the 12 months to mid-October, compared to a 3% official target with 1.5 percentage points tolerance margin either side. He reiterated that the country needs positive and structural fiscal developments to reverse the recent increase in risk premiums, highlighting the prospect of such announcements following municipal elections at the end of this month.According to Campos Neto, much of the risk premium in the yield curve is currently tied to fiscal concerns, but Brazil’s public accounts situation is not worse than that of many other countries, with long-term interest rates showing prices inconsistent with fundamentals.Campos Neto said the central bank remained determined to pursue its inflation target.The bank’s upcoming policy meeting is scheduled for Nov. 5-6. Economists expect an accelerated rate hike of 50 basis points, following a 25 basis-point increase in September that raised the interest rate to 10.75%. More

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WASHINGTON (Reuters) – French Finance Minister Antoine Armand on Friday, following a Moody’s (NYSE:MCO) credit rating warning on his country’s debt, said that France’s top fiscal priority is to reduce its public deficit to a targeted 5% of GDP by 2025.Moody’s late on Friday revised France’s outlook to “negative” from “stable,” citing mounting uncertainty that the country will be able to curb widening budget deficits.Speaking to reporters on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington, Armand said: “We noted the prospect of the negative outlook. We didn’t wait for the negative outlook to take the necessary measures” to control debt.Armand said that France needed to foster growth as part of its drive to rebalance deficits and finance investments needed for the country’s clean energy transition.”France’s top priority is to reduce its debt and its budget deficit, and the target would have a 5% target by 2025, referring to a budget plan unveiled earlier this month.”It is not just a financial target. It’s also a political target, because it’s the beginning of the public finance consolidation that we aim at in France,” he said.Armand declined to comment on the Nov. 5 U.S. presidential election when asked about the potential for high U.S. tariffs on European goods if Republican candidate Donald Trump is elected president.But Armand said that France, the U.S. and other countries need to coordinate their policies opposing non-market trade policies such as those of China, adding that France shares U.S. concerns.”At the very least, we need to coordinate answers against non-market practices, because if we don’t coordinate the answers to the non-market practices at the end of the day, it will create more disorder and more imbalances,” he said. More

Moody’s decision not to cut its rating on French debt is a relief for policymakers, as a downgrade was widely seen as possible. However, the downward revision of the French outlook underlines growing international concerns about the country’s public finances, and comes as a belt-tightening 2025 budget bill is being discussed in parliament. In a statement after the decision, French Finance Minister Antoine Armand said the French government would act to restore its public finances. At a press conference on the sidelines of International Monetary Fund and World Bank annual meetings in Washington, he said France’s top fiscal priority is to reduce its public deficit to 5% of GDP in 2025, from 6.1% currently.”We noted the prospect of the negative outlook. We didn’t wait for the negative outlook to take the necessary measures,” to control debt, he said. A spiraling fiscal deficit as spending exceeds tax revenues has put increasing pressure on Prime Minister Michel Barnier to act.This month, Barnier presented France’s 2025 budget, which includes 60 billion euros’ worth of spending cuts and tax hikes, mostly targeting big companies.”The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries,” Moody’s said.It also raised concerns over the country’s deteriorating debt affordability relative to its peers and added that the turbulent political situation raises risks about the institutions’ ability to deliver sustained deficit reductions.Still, it said its decision to maintain the Aa2 rating reflected France’s large and diversified economy. Moody’s added that France’s public institutions are competent and previous governments have shown willingness to reform the economy.Fitch cut France’s outlook to “negative” from “stable” in mid-October on fears of widening deficits and a complicated political backdrop hampering the government’s ability to shore up its finances. More

(Reuters) -Canada’s main stock index ended lower for a fifth straight day on Friday, led by declines for the real estate and consumer discretionary sectors, as investors turned cautious ahead of a potentially volatile period for the market.The Toronto Stock Exchange’s S&P/TSX composite index ended down 87.88 points, or 0.36%, at 24,463.67, extending its pullback from last Friday’s record high.For the week, the TSX was down 1.45%. It was the first time since April the index has fallen for five straight days.Still, it was up 1.93% since the beginning of October.”We had a really good start to the month,” said Greg Taylor, portfolio manager at Purpose Investments. “We pulled forward a lot of good news and now people are bracing for some volatility in the next few weeks.”Wall Street has been unsettled this week by a rapid rise in U.S. bond yields, while uncertainty around the Nov. 5 U.S. presidential election has also made investors cautious after markets started pricing in a second Donald Trump administration in recent weeks.Canada’s immigration reduction targets announced this week will likely have an impact on the Bank of Canada’s growth forecast, Governor Tiff Macklem said, but cautioned the bank was yet to analyze the numbers.On Wednesday, the BoC cut interest rates by an unusually large half a percentage point to support the economy. The real estate and consumer discretionary sectors both fell 0.9% on Friday, while the materials group, which includes gold mining shares, was down 0.72%.Mali has accused Barrick Gold (NYSE:GOLD) Corp of failing to abide by commitments made in a recent agreement, charges the Canadian miner denied after the market’s close on Thursday. Shares of Barrick ended 3.16% lower on Friday.Energy was a bright spot, rising 1.39%, as oil futures settled 2.27% higher at $71.78 a barrel. More

NEW YORK (Reuters) -Global stocks slipped on Friday, finishing the week lower amid U.S. election jitters, while oil prices rose due to concerns about fighting in the Middle East.Republican former President Donald Trump and Democratic Vice President Kamala Harris are polling neck-and-neck in crucial swing states ahead of the Nov. 5 election. Investors are anxious about a contested result roiling world markets and unleashing fresh geopolitical uncertainty.The benchmark S&P 500 ended slightly lower and closed the week down nearly 1%, driven by losses in utilities and financials as well as gains in technology and communication-services stocks. Nasdaq finished the week higher.The Dow Jones Industrial Average fell 0.61% to 42,114.40, the S&P 500 eased 0.03% to 5,808.12 and the Nasdaq Composite rose 0.56% to 18,518.61. The European shares index ended down 0.03% after giving up gains in choppy trading and finished 1.2% lower for the week. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.02% but dropped nearly 2% for the week.”The market is still somewhat choppy and part of that is we were up six weeks in a row and up 10 out of 11 months and right now the market, after that big run, is facing these interest rates that are staying a little bit higher,” said Keith Lerner, co-chief investment officer at Truist Advisory Services in Atlanta.”Historically, the volatility in an election year tends to spike in October. We haven’t seen a spike, but it’s very normal for markets to get more jittery into the election.”Brent crude futures settled up 2.25% at $76.05 a barrel. U.S. West Texas Intermediate crude settled up 2.27% to $71.78. Both crude futures finished the week up about 4%.U.S. Treasury yields edged higher as investors wait on key employment data next week for fresh clues on the likely path of Federal Reserve interest-rate cuts.Traders are pricing in near-95% odds of a 25-basis-point cut at the Fed’s November meeting, according to the CME Group’s (NASDAQ:CME) FedWatch Tool. The yield on benchmark U.S. 10-year notes rose 3.8 basis points to 4.24%.The dollar advanced and was set for a fourth weekly gain against Japan’s yen, as an uncertain backdrop for markets sent the yen near three-month lows ahead of an election in Japan over the weekend. The dollar strengthened 0.26% against the yen to 152.22. Against the Swiss franc, the dollar strengthened 0.08% to 0.866. The euro, however, was down 0.29% at $1.0796. Sterling weakened 0.08% to $1.2961.The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.24% to 104.30.Gold prices rose in choppy trading after retreating from record highs. Spot gold rose 0.28% to $2,743.31 an ounce. U.S. gold futures settled 0.2% higher at $2,754.60. Prices had hit an all-time high of $2,758.37 on Wednesday.”Over time, interest rates, inflation and the economy are the leading factors that affect the stock market,” said Tom Plumb, CEO and portfolio manager at Plumb Funds in Madison, Wisconsin.”But in the short run, there’s no question that this is a market being bounced around by political developments and expectations, and the general perception that Trump would be better for the markets than Harris.” More

And as a U.S. presidential election nears, global market swings are getting bigger.Here’s all you need to know about the week ahead from Lewis Krauskopf in New York, Kevin Buckland in Tokyo and Naomi Rovnick, Amanda Cooper and Sinead Cruise in London. 1/ MEGACAPS, THEN JOBSA full-on week of U.S. earnings is capped by Friday’s key jobs data.Five of the “Magnificent Seven” U.S. titans report quarterly results: Google parent Alphabet (NASDAQ:GOOGL) on Oct. 29, Microsoft (NASDAQ:MSFT) and Facebook parent Meta Platforms (NASDAQ:META) on Oct. 30, and Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) on Oct. 31. The companies have an outsized influence on markets because of their massive market values.Tesla (NASDAQ:TSLA), the first of the “Magnificent Seven” to report, said on Wednesday it expects to achieve slight growth in vehicle deliveries this year and reported a higher-than-expected third-quarter profit margin. Economists meanwhile expect the U.S. economy created 140,000 new jobs in October, versus 254,000 in September.Two significant storms could skew the data, which comes just ahead of the Nov. 5 U.S. election and a potential 25-basis-point rate cut from the Federal Reserve on Nov. 7.2/ SNAP     When new Japanese premier Shigeru Ishiba called a snap election just weeks ago, he had expected to consolidate his party’s hold on power.    But his Liberal Democratic Party could lose its absolute majority after Sunday’s election and fall short of enough seats to govern when combined with coalition partner Komeito.    Japanese equities, hurt by uncertainty, are on the backfoot.    A disastrous loss could force Ishiba to fall on his sword, wresting the dubious mantle of shortest-serving prime minister from Sosuke Uno, who held office for under 10 weeks in 1989.    Taking on an additional coalition partner could force Ishiba to shelve some market-unfriendly policies he has favoured, such as higher corporate and capital gains taxes.    Politics could make the Bank of Japan’s job more difficult, with policy normalisation already complicated by a fragile economy and unstable markets. It is expected to stand pat at its meeting ending on Thursday.3/ TRICK OR TREAT?Britain’s new Labour government unveils its first budget on Wednesday. With few choices available to finance minister Rachel Reeves as she balances high debt, public spending pledges and a promise not to hike income tax, markets fear extra borrowing and tax grabs on capital gains, dividends and inherited wealth. The 10-year gilt yield is about 18 bps higher this week, dragged up in part by rising U.S. Treasury yields, even after soft inflation fuelled hopes for UK rate cuts. Gripped by budget uncertainty, UK stocks are underperforming again after a promising pre-election rally for these long-term laggards. But bullish UK investors, a thinning crowd, reckon British markets could bounce if Reeves’ Halloween-eve budget is less frightening than Labour’s gloomy assessments of the economy suggested. 4/ EVEN SICKER MANThe euro is witnessing one of its worst runs ever.It has only posted four up-days in the last month, its weakest performance since May 2012, when a sovereign debt crisis threatened the survival of the currency bloc.The prospect of U.S. rates not falling as quickly as anticipated has boosted the dollar, while expectations for Republican Donald Trump to win the November election are hitting the euro, given the risk of a sharp rise in U.S. tariffs on European goods.The European Central Bank is expected to ramp up rate cuts as the currency bloc’s economy sputters, especially in Germany. Europe’s powerhouse is deteriorating faster than any other industrialised country and the coming week brings data on growth and inflation that are unlikely to offer much reassurance.5/ TRUST USUBS and HSBC are leading European banks reporting Q3 earnings in the coming days, following Deutsche Bank and Barclays.The sector is healthier than at any point since the global financial crisis, yet investors want reassurance they can trust its longer-term earnings power as interest rates fall.Besides looking for evidence of asset quality resilience, they want a sharper strategy, lower costs and the potential to outperform in a low growth global economy.HSBC has already set the tone this week, unveiling a streamlined executive committee and a merger of some costly banking operations in a sweeping restructuring along East-West lines.But as Deutsche showed, past problems can still detract from future goals. The German lender blamed a lacklustre domestic economy for higher provisions against a possible rise in bad debts to 1.8 billion euros ($1.95 billion) for the full year, from 1.5 billion euros last year.($1 = 0.9239 euros) (Graphics by Pasit Kongkunakornkul, Kripa Jayram, Prinz Magtulis and Tom Sims; Compiled by Dhara Ranasinghe; Editing by Emelia Sithole-Matarise) More

WASHINGTON (Reuters) -A weak yen is beneficial for Japan’s economy as the boost to exports exceeds the increase in the cost of imports, a senior International Monetary Fund (IMF) official said on Friday.Nada Choueiri, the IMF’s Japan mission chief, also urged Japan to raise interest rates at a gradual pace and compile supplementary budgets only when a big shock hits the economy.”We would advise the Bank of Japan to remain cautious, as they have been so far, and to be gradual” in the pace of rate hikes, since there was high uncertainty over the inflation outlook, she said in an interview.The yen has resumed its declines recently against the dollar on expectations that the U.S.-Japan interest rate divergence will remain wide, posing a headache for authorities who fret of the hit to households from rising import costs from a weak yen.But Choueiri said the benefit from rising exports from a weak yen exceeded the rising costs in imports for Japan, which is “a very outward-oriented” economy. “So, the yen depreciation on net benefits growth in Japan,” she said.The yen’s falls triggered warnings from Japanese Finance Minister Katsunobu Kato, who said on Wednesday the yen’s recent “one-sided, rapid” moves warranted “heightened vigilance.””It’s important to recognize that the Japanese authorities are committed to a flexible exchange rate regime,” she said, when asked whether rapid yen moves would justify Tokyo intervening in the currency market.TREADING CAUTIOUSLYAfter exiting from a decade-long, radical stimulus in March, the Bank of Japan raised short-term interest rates to 0.25% in July and signaled its resolve keep hiking if the economy makes progress toward durably hitting its 2% inflation target.The IMF expects Japan’s inflation to sustainably hit 2% with price growth increasingly driven by domestic demand, Choueiri said, meeting the prerequisite for more rate hikes.But the Bank of Japan must tread cautiously in raising rates given various risks, such as the potential hit to exports from trade fragmentation, the chance of consumption and wage growth weakening, and the fallout from yen moves on inflation.”The first priority is to remain data-dependent and analyze all the data that comes, and to be very, very gradual in the process of raising the policy rate,” she said.The Bank of Japan is widely expected at a two-day policy meeting next week to keep its short-term policy rate steady at 0.25%. Most economists polled by Reuters expect it to hike rates again by March next year.In its World Economic Outlook issued this month, the IMF projected Japan’s economic growth to accelerate to 1.1% in 2025 from 0.3% this year as rising real wages boost consumption.Japan was seeing early signs of strengthening consumption, and had “real chances” of achieving strong wage hikes next year, Choueiri said.With the weak yen pushing up the cost of fuel and food, however, politicians are keen to cushion the blow to households from rising living costs.Japan’s new prime minister, Shigeru Ishiba, has pledged to compile a supplementary budget to fund another large-scale spending package after the general election on Sunday.Such a step would come on top of numerous spending packages deployed since the COVID-19 pandemic, which included blanket subsidies to curb gasoline and utility costs – moves that have added to Japan’s already huge public debt.”The practice of supplementary budgets is better left for times when there are big shocks in the economy that cannot be accommodated by automatic stabilizers,” Choueiri said.Any spending increase must go to areas that promote growth, such as infrastructure, and targeted to those who need support rather than blanket subsidies like those to curb fuel costs, she said. More