LONDON (Reuters) – It’s rate hike central with monetary policy meetings in the United States, Britain, Australia and Norway in the week ahead.

Any signs that the pace of aggressive tightening among big developed economies could slow is key. That also puts the spotlight on the October U.S. jobs report and euro area inflation data. In emerging markets, all eyes are on Brazil after leftist Luiz Inacio Lula da Silva won Sunday’s presidential election.

Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf and Rodrigo Campos in New York, and William Schomberg and Dhara Ranasinghe in London. Graphics by Vincent Flasseur and Sumanta Sen.

1/ FOUR IN A ROW

A fourth straight jumbo 75-basis point (bps) interest rate hike is widely expected when the Federal Reserve meets on Nov 1-2.

Investors, instead are focused on whether the pace of future hikes will slow as the Fed weighs the risks to economic growth against its progress in curbing soaring inflation.

    Wall Street’s latest rally is underpinned by some hopes the Fed will react to softer economic data by easing up on their aggressive rate hikes. Fed chair Jerome Powell has come under political pressure to be careful of putting U.S. jobs at risk by tightening policy too much.

    A consequential week for markets also includes Friday’s October U.S. payrolls report, with economists polled by Reuters forecasting the economy created 200,000 new jobs.

GRAPHIC – Terminal velocity

https://graphics.reuters.com/GLOBAL-MARKETS/zjpqjqyxnvx/chart.png

2/ MORE OF THE SAME

The Bank of England looks set to raise rates by the most since 1989 on Thursday with a 75 bps increase baked into market expectations.

That is down from near-100% bets on a full percentage-point leap in the Bank Rate which were doused last week by new finance minister Jeremy Hunt when he reversed almost all of former Prime Minister Liz Truss’s tax cuts.

But the delay of the first budget plan of Hunt and new Prime Minister Rishi Sunak until Nov. 17 will make it harder for the BoE to spell out its economic forecasts.

After delays caused by Britain’s recent market mayhem, the BoE is also due to start selling bonds from its stimulus stockpile on Tuesday.

GRAPHIC – BoE implied interest rate BoE implied interest rate

https://graphics.reuters.com/GLOBAL-MARKETS/znpnbdxwgpl/chart.png

3/ PEAK, WHERE ART THOU?

In the euro area, the October flash inflation estimate on Monday surged past expectations yet again to hit a record high. Inflation in the bloc hit 10.7%, accelerating from 9.9% last month and dashing hopes that peak inflation could be near.

The European Central Bank just delivered its second 75 bps rate increase to control price pressures.

Even if signs of peak inflation do emerge soon, policymakers and markets will wait to see if underlying price pressures are broadening out.

Core inflation, which strips out volatile food and energy prices, was at 6% in September – well above the ECB’s 2% target. No wonder some ECB officials are keen to take monetary tightening further by winding down the bonds the ECB holds on its balance sheet.

GRAPHIC – Euro zone’s persisting inflation concerns

https://graphics.reuters.com/GLOBAL-MARKET/byprlomoope/chart.png

4/ DOVISH TOO SOON?

The Reserve Bank of Australia is under pressure ahead of Tuesday’s policy gathering.

    Its decision to slow hikes to a quarter point clip earlier this month reverberated through global markets as investors began to consider peak rates might be near.

    But data on Wednesday showing a shock jump in Aussie inflation to a 32-year peak suggests the RBA has thrown itself behind the curve, and beckons Governor Philip Lowe to perform an embarrassing about-face.

    The Aussie dollar’s reaction has been fairly subdued so far, but a sudden shift back to a hawkish policy outlook should provide some welcome support to a currency that has been battered by global equity market angst and China growth worries.

GRAPHIC – Australian inflation hits 32-year high

https://graphics.reuters.com/AUSTRALIA-ECONOMY/INFLATION/byprlokmepe/chart.png

5/ LULA IS BACK

Former President Lula da Silva won Sunday’s presidential election with 50.9% of votes versus 49.1% for sitting President Jair Bolsonaro, marking a stunning comeback and the end of Brazil’s most right-wing government in decades.

Brazilian financial markets may be in for a volatile week with investors examining speculation about his cabinet and the risk of Bolsonaro questioning results.

Brazil’s currency was higher in early Monday trading.

The real remains the best performing free-floating emerging market currency in Latin America versus the U.S. dollar so far this year.

GRAPHIC – Real performance in 2022

https://graphics.reuters.com/GLOBAL-THEMES/BRAZIL/mopakmqlgpa/chart.png

(Compiled by Dhara Ranasinghe; Editing by Tommy Reggiori Wilkes and Muralikumar Anantharaman)

BEIJING (Reuters) -China’s factory activity unexpectedly fell in October, weighed by softening global demand and strict domestic COVID-19 curbs, which hit production, travel and shipping in the world’s second-largest economy.

While China’s economic growth beat expectations in the third quarter, persistent COVID-19 curbs, a prolonged property slump and global recession risks are clouding a more robust revival in factory and consumer activity.

The official manufacturing purchasing managers’ index (PMI) fell to 49.2 from 50.1 in September, the National Bureau of Statistics (NBS) said on Monday.

The result unexpectedly broke below the 50-point mark that separates growth from contraction with economists in a Reuters poll forecasting the PMI to have come in at exactly 50.0.

“The official PMIs point to a further loss of momentum in this month as virus disruptions worsened and export orders remained under pressure,” said Zichun Huang, economist at Capital Economics in a research note.

“With the zero-COVID policy here to stay, we think the economy will continue to struggle heading into 2023.”

Separately, the non-manufacturing PMI, which looks at service sector activity, fell to 48.7 from 50.6 in September.

Benchmark mainland Chinese indexes fell after the PMI release.

The offshore yuan fell 0.32% against the dollar but later rose slightly.

As of last week, 31 cities have implemented various levels of lockdowns or some kind of district-based control measures, affecting around 232 million people, Nomura said in a research note.

Economists see China’s current zero-COVID policy as a major economic constraint and expect restrictions to stay in place for some time after this month’s Communist Party Congress.

That has raised concerns that Beijing’s new political leadership could prioritise containing COVID-19 over economic growth.

“We don’t expect the zero-COVID policy to be abandoned until 2024, which means virus disruptions will keep in-person services activity subdued,” said Huang from Capital Economics.

The COVID containment measures are seen disrupting factory output at iPhone maker Foxconn with migrant workers leaving the massive assembly facility in the COVID-hit city of Zhengzhou amid infection worries.

A person with direct knowledge of the matter told Reuters COVID-19 woes at the Zhengzhou plant could slash the site’s November iPhone output by as much as 30%.

Slowing exports, a distressed property market and the yuan’s weakness against the U.S. dollar also weighed on the outlook for the world’s second-biggest economy, Huang added.

Economists expect China will miss its annual growth target of around 5.5%, with the latest Reuters poll forecasting 2022 growth at 3.2%. The poll showed China’s growth could pick up to 5.0% in 2023.

DEMAND WEAKENS

The manufacturing PMI survey pointed to weakening demand with the new orders subindex showing contraction for the fourth straight month.

Manufacturers have grappled with falling external demand, which has been hit by rising interest rates, inflation and the war in Ukraine.

Factories have had to cut their payrolls to reduce costs, adding to worries about the weak labour market, which are weighing heavily on consumption and consumer confidence. The employment index has declined since March 2021.

The official manufacturing PMI largely focuses on big and state-owned firms. The private sector Caixin manufacturing PMI, which centres more on small firms and coastal regions, will be published on Tuesday.

Bruce Pang, chief economist at Jones Lang Lasalle, said China needs to accelerate major projects and expand investment in the fourth quarter, a traditional construction season, in order to stabilise the economy.

(Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes)

By John Revill

ZURICH (Reuters) -Credit Suisse on Monday unveiled details of its plan to raise 4 billion Swiss francs ($4.01 billion) from investors to support the embattled bank’s bid to tackle the biggest crisis in its 166-year history.

Switzerland’s second-biggest lender is raising new capital to fund an overhaul, which will see it cut thousands of jobs and shift its focus away from investment banking and towards the less turbulent area of wealth management.

Its reputation has been battered by a string of scandals and losses, including a $5.5 billion loss from the unravelling of U.S. investment firm Archegos, and it had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greensill.

The bank now is offering new and existing shareholders the chance to buy new shares.

It said new investors have committed to buying 462 million new shares at a purchase price of 3.82 Swiss francs ($3.83), equivalent to 94% of the volume weighted average price of Credit Suisse shares on Oct. 27 and 28, raising 1.76 billion Swiss francs.

Some 307.6 million of the new shares are expected to be bought by Saudi National Bank, giving it a 9.9% stake in Credit Suisse.

Existing investors meanwhile will get the chance to buy 889 million shares being offered at 2.52 francs per share, with subscription rights corresponding to the size of their present stake.

It is expected that seven pre-emptive subscription rights will entitle their holder to purchase two new shares at a 32% discount on the reference price, Credit Suisse said.

The bank’s shares opened 3.2% higher in Switzerland at 40.55 Swiss francs. They are down about 55% this year.

Both issues have to be approved at an extraordinary general meeting due to be held on Nov. 23. The final terms of the rights issue are expected to be announced the following day.

If shareholders reject the plan, Credit Suisse said it would issue 1.8 billion new shares at an offer price of 2.27 francs per share, which would still enable it to raise 4 billion francs.

“We assume that the offering to qualified investors will take place and that the number of CS shares will rise from currently 2.6 bn to 4.0 bn,” analysts at Bank Vontobel said.

“In our financial model, we had increased the number from 2.6 bn to 3.6 bn in September. We will have to raise it to 4 bn.”

Analysts at JP Morgan said the capital increase will lead to 27% total dilution in the economic earnings of Credit Suisse shares.

The bank has been pushing to sell assets to raise money and free up capital to try to limit how much cash it needs to raise to handle its legacy litigation costs and retain a cushion for rough markets ahead.

On Monday, Credit Suisse said it would act as its own global coordinator for the rights offering, while Deutsche Bank, Morgan Stanley, RBC Capital Markets and Societe Generale would be joint lead managers and joint bookrunners.

ABN AMRO in cooperation with ODDO BHF SCA, Banco Santander, Bank of America, Barclays, BNP Paribas, Citi, Commerzbank, Crédit Agricole CIB, Goldman Sachs International, ING, Intesa Sanpaolo, Keefe, Bruyette & Woods, Mediobanca, SMBC Nikko Capital Markets, Wells Fargo Securities International are acting as joint bookrunners.

($1 = 0.9972 Swiss francs)

(Reporting by John Revill, Editing by Miranda Murray, Kirsten Donovan and Jane Merriman)

By Julie Gordon and Rod Nickel

OTTAWA/WINNIPEG, Manitoba (Reuters) -At a warehouse on an industrial stretch in Ottawa, giant metal crates of donated groceries are piled high as volunteers sort canned goods, pasta and other foods to be distributed to pantries around the Canadian city.

Demand has surged 33% at the Ottawa Food Bank from pre-COVID-19 pandemic levels, with visits up as spiraling grocery, gas and rent prices, along with fast-rising borrowing costs, leave more Canadians struggling to make ends meet.

“We are absolutely seeing more people,” said Rachael Wilson, chief executive of the Ottawa Food Bank, adding the organization is now spending C$6 million ($4.4 million) a year on food, up from C$2 million pre-pandemic.

“That’s because the cost of food has risen … but also because of the number of people that are turning to a food bank right now,” said Wilson. “It is unfortunately a perfect storm.”

Canada’s headline inflation rate has eased to 6.9% from a peak of 8.1%, but food costs are still accelerating and underlying price pressures remain sticky.

At the same time, the Bank of Canada (BoC) has hiked interest rates by 350-basis points in just seven months, one of its sharpest tightening campaigns ever, to try to force inflation back to its 2% target.

The result is Canadian consumers and small businesses are being squeezed from both sides, prompting politicians, unions and even some economists to implore the central bank to slow its pace of tightening.

The bank this week signaled its tightening campaign was nearing its peak, but made clear it was not done yet, as it hiked rates by 50-bps to a fresh 14-year high.

In a television interview after the decision, BoC Governor Tiff Macklem said restoring price stability was not easy, but rampant inflation would be worse.

“I understand a lot of Canadians are in debt and interest rate increases will put more stress on them. It is something that we are watching closely,” he told Radio-Canada.

‘EVERYONE’S NERVOUS’

Canada, with its pricey homes and top of the G7 household debt levels, is particularly sensitive to higher interest rates, with fears mounting the BoC’s aggressive hikes will trigger a recession.

Wes Farnell, who runs Eight Ounce Coffee in Calgary with his wife Jen, said their specialty coffee equipment business was growing by 25% to 35% a year before the pandemic, and then boomed as lockdowns led to surging demand for high-end lifestyle appliances.

Now he is already seeing signs that hot inflation and recession worries have consumers focused on essentials rather than luxury appliances, which is adding up to fewer large orders even as the holiday shopping season approaches.

“Our wholesalers are definitely more tentative about spending money,” said Farnell. “Everyone’s nervous … Will people be spending money? Will there be any money to spend? Will inflation go up even further?”

The pain is also being felt on the farm, where record high debt levels and surging operating costs are weighing on many farmers, despite strong grain prices.

For Brodie Haugan, who farms with his parents near Orion, Alberta, inflation has hit especially hard, coupled with a relentless drought.

With the price of feed rising faster than cattle prices, Haugan reduced his 400-cow herd by 30% in spring.

He also delayed buying a much-needed new truck, as the cost shot up to C$100,000 from C$75,000 pre-pandemic.

“Right across the board, everything has increased in price, making it very difficult to really do anything at all,” Haugan said.

($1 = 1.3516 Canadian dollars)

(Reporting by Julie Gordon in Ottawa and Rod Nickel in Winnipeg; Editing by Josie Kao)

By Rich McKay

(Reuters) – A man exonerated last year in the 1965 slaying of Black activist Malcolm X and the estate of a second man cleared posthumously reached a settlement totaling $36 million with New York City and state, their attorney said on Sunday.

Muhammad Aziz, 84, had sought $40 million after serving about two decades in prison and more than 55 years after being wrongly blamed in the case that raised questions about racism in the criminal justice system. Aziz is married and has six children.

Khalil Islam, who died in 2009 at age 74, also spent more than 20 years in prison and was exonerated in November 2021. His estate had also filed a $40 million suit.

The city has agreed to pay $26 million and the state will pay $10 million, attorney David Shanies told Reuters. The survivor and the man’s estate will split the settlement.

“Muhammad Aziz, Khalil Islam, and their families deserve this for their suffering,” Shanies said. “They suffered a lifetime under the cloud of wrongly being accused of killing a civil rights leader.”

Nick Paolucci, a spokesman for the New York City Law Department, told the New York Times on Sunday that, “this settlement brings some measure of justice to individuals who spent decades in prison and bore the stigma of being falsely accused of murdering an iconic figure.”

A representative for the state attorney general’s office was not immediately available for comment.

Malcolm X became prominent as the voice of the Nation of Islam, which espoused Black separatism, before leaving the organization in 1964 and angering some of its followers. He was shot dead at age 39 in February 1965 while preparing to speak at New York’s Audubon Ballroom.

A third man, Mujahid Halim, was also convicted for the shooting. He testified that Aziz and Islam were innocent. Halim was paroled in 2010.

(Reporting by Rich McKay in Atlanta; editing by Donna Bryson and Sandra Maler)

By Nathan Frandino and Steve Gorman

SAN FRANCISCO (Reuters) -The man who clubbed U.S. House Speaker Nancy Pelosi’s husband in the head with hammer, shouting “Where is Nancy?” after forcing his way into the couple’s San Francisco home, faced charges of attempted murder and other felonies a day later.

Police have not offered a motive for Friday’s assault on Paul Pelosi, 82, who according to his wife’s office underwent surgery for a skull fracture and injuries to his hands and right arm, though doctors expect a full recovery.

President Joe Biden, speaking to reporters in Delaware on Saturday, said the attack appeared to have been “intended for Nancy.”

The incident stoked fears about political violence less than two weeks ahead of midterm elections on Nov. 8 that will decide control of the House of Representatives and Senate, coming amid the most vitriolic and polarized U.S. political climate in decades.

The 82-year-old House speaker herself, a Democrat who is second in the constitutional line of succession to the U.S. presidency, was in Washington at the time of the assault.

She flew to San Francisco hours after the attack to be with her husband, and released a statement on Saturday expressing dismay that “a violent man broke into our family home, demanded to confront me and brutally attacked my husband Paul.”

“Our children, our grandchildren and I are heartbroken and traumatized by the life-threatening attack on our Pop,” she said in the brief statement, addressed to her congressional colleagues.

“Please know that the outpouring of prayers and warm wishes from so many in the Congress is a comfort to our family and is helping Paul make progress with his recovery,” she wrote. “His condition continues to improve.”

Earlier in the day, Paul Pelosi Jr., the couple’s son, was seen outside Zuckerberg San Francisco General Hospital, where his father, a real estate and venture capital executive, was being treated. Asked by a reporter for an update on his father, he replied: “So far, so good.”

Police identified the man arrested at the scene as David DePape, 42. He, too, was taken to a San Francisco hospital, but it was not made clear whether he was there for medical or psychiatric care or both.

Online sheriff’s records showed he was booked into custody on suspicion of attempted murder, assault with a deadly weapon, elder abuse, battery, burglary, threatening a public official or family member, and other felonies. Formal charges will be filed on Monday, and his arraignment is expected on Tuesday, according to the San Francisco district attorney’s office.

San Francisco Police Chief William Scott told a Friday night news briefing that police detectives, assisted by FBI agents, had yet to determine what precipitated the home invasion but said, “We know this was not a random act.”

The intruder shouted, “Where is Nancy?” before attacking, according to a person briefed on the incident who spoke to Reuters on condition of anonymity.

FROM HEMP TO HATE?

In the search for a motive, attention turned to the suspect’s apparent internet profile.

In recent posts on several websites, an internet user named “daviddepape” expressed support for former President Donald Trump and embraced the cult-like conspiracy theory QAnon. The posts included references to “satanic pedophilia,” anti-Semitic tropes and criticism of women, transgender people and censorship by tech companies.

Older messages promoted quartz crystals and hemp bracelets. Reuters could not confirm the posts were created by the suspect arrested Friday.

Experts on extremism said the attack could be an example of a growing trend they call “stochastic terrorism,” in which sometimes-unstable individuals are inspired to violence by hate speech and scenarios they see online and hear echoed by public figures.

“This was clearly a targeted attack. The purpose was to locate and potentially harm the speaker of the House,” said John Cohen, a former head of intelligence at the Department of Homeland Security who is working with U.S. law enforcement agencies on the issue.

The San Francisco Chronicle posted a photo of a man it identified as DePape dancing at the 2013 wedding of two nudist activists in San Francisco, though he was clothed. DePape, then a hemp jewelry maker who listed himself as a member of the left-leaning Green Party, lived with the couple in Berkeley and was best man at their wedding, the newspaper reported. It said he grew up in Canada.

Scott said the intruder forced his way into the Pelosis’ three-story townhouse through a rear door. Aerial photos showed shattered glass at the back of the house in the city’s affluent Pacific Heights neighborhood.

WELLBEING CHECK

The chief said police were dispatched for a wellbeing check on the basis of a cryptic emergency-911 call from the residence. Other news outlets reported the call was placed by Paul Pelosi.

Scott credited the 911 operator with discerning that “there was more to this incident than what she was being told” by the caller, thus dispatching the call at a higher priority than normal. Scott called her decision “life-saving.”

According to Scott, police arriving at the front door glimpsed DePape and Pelosi struggling over a hammer. As the officers yelled at both men to drop the tool, DePape yanked the hammer away and was seen striking Pelosi at least once, the chief said. The officers then tackled, disarmed and arrested DePape, Scott said.

The incident came a day after New York City police warned that extremists could target politicians, political events and polling sites ahead of elections.

The U.S. Capitol Police, which reported 9,625 threats against lawmakers of both parties in 2021, up nearly threefold from 2017, urged congressional offices in a memo on Saturday to take extra security precautions given the heightened risks they face.

As a Democratic leader in Washington and longtime representative from one of America’s most liberal cities, Nancy Pelosi is a frequent target of Republican criticism.

Her office was ransacked during the Jan. 6, 2021, attack on the U.S. Capitol by a mob of Trump supporters, some of whom hunted for her during the assault.

(Reporting by Nathan Frandino in San Francisco and Steve Gorman in Los Angeles; Additional reporting by Andrea Shalal, Susan Heavey, Patricia Zengerle, Andy Sullivan, Brendan O’Brien, Jonathan Allen, Doina Chiacu, Rich McKay, Rami Ayyub, Tim Ahmann, Dan Whitcomb, Ismail Shakil, Tyler Clifford, and Gram Slattery; Writing by Steve Gorman; Editing by Jonathan Oatis, Alistair Bell and Daniel Wallis)

By Charlotte Bruneau

BAGHDAD (Reuters) – With a violin on his back and maps in his bag, Dan Hodd left Spain a month ago and was cycling through busy Baghdad as he heads to the COP27 climate talks in Egypt that he firmly intends to reach without flying.

“I am trying to illustrate the importance within the transport sector to do more about the climate crisis,” the 29-year-old Briton said.

“We need to consider the way we are travelling around the world, bouncing back and forth on budget holidays or for work trips.”

Hodd has cycled, taken trains, buses and shared taxis to reach Iraq en route to Jordan and eventually Sharm el-Sheikh where the climate talks take place from Nov. 6-18.

“In 2019, airlines were responsible for 2.4% of global CO2 emissions,” said Dan Rutherford, who directs the International Council on Clean Transportation’s aviation programmes, adding that because of the additional climate impact of aviation, its total warming impact rises to 3.5%.

After a drop during the coronavirus pandemic, air traffic is expected to bounce back to 2019 levels by 2024-25, he said.

Avoiding flying is not only part of Hodd’s message to delegates at COP27. His trip to Egypt is part of a long-term project to visit 100 countries in 10 years without flying, busking with his violin to earn enough to go on.

“A lot of why I have been travelling this way is a bit a guilt that I feel for the fact that I knew this insatiable wanderlust would have me travelling around the world for a long time,” Hodd said.

Now in his sixth year of travel, the seasoned traveller and graduate in music psychology told Reuters that pollution on the road was one of the main challenges for cyclists.

“The smell of petrol, it just dominates everything” he said, adding that he often had to ride with his mouth covered despite high temperatures.

“We live on a planet that is not built for sustainable travelling”, he said.

(Reporting by Charlotte Bruneau; Editing by Nick Macfie)

By Georgina Lee

HONG KONG (Reuters) – Hong Kong’s government has proposed allowing retail investors to trade in cryptocurrencies and crypto exchange-traded funds – a move it hopes will help it rebuild its fintech hub status.

The city, which previously proposed limiting crypto trade to professional investors, has seen planned rules for digital assets heavily criticised for stifling innovation, prompting a slew of start-ups to move to other markets such as Singapore and Dubai.

Authorities will start a consultation process on giving retail investors “a suitable degree of access” to virtual assets, Financial Secretary Paul Chan said in a keynote address broadcast to the Hong Kong Fintech Week conference.

“We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” he said.

The government will also review property rights for tokenised assets and explore legalising so-called smart contracts – self-executing transactions whose results depend on pre-programmed inputs.

These moves are likely to pave the way for real estate security token offerings (STOs), industry players said. STOs are blockchain-based tokens that represent ownership interests or entitle holders to income or dividends generated from real assets.

The latest announcement could put Hong Kong’s rules on a par with those of Singapore, said Andy Mehan, chief compliance officer for APAC at U.S. crypto exchange Gemini.

“Industry participants want to see consistency in the global regulatory regime, otherwise there will be opportunities for bad actors to exploit loopholes in jurisdictions with less rigid laws,” he said.

While Singapore allows retail investors to trade in cryptocurrencies, its central bank has been discouraging the public from speculative trading in cryptocurrencies and brought in restrictions on the advertising of cryptocurrency services in public places. It is also proposing new measures.

Hong Kong’s latest move to legalise retail crypto trade would also set Hong Kong further apart from mainland China, which has a imposed a blanket ban on cryptocurrency trade.

“This is a positive move as it sends out a strong message that Hong Kong is taking a different approach in regulating its capital market,” said Adrian Wang, chief executive of crypto brokerage Metalpha.

($1 = 7.8492 Hong Kong dollars)

(This story has been refiled to correct the spelling of company name to Metalpha in last paragraph)

(Reporting by Georgina Lee; Additional reporting by Anshuman Daga; Editing by Vidya Ranganathan and Edwina Gibbs)

(Reuters) -The venture between Stellantis and Guangzhou Automobile Group Co (GAC) producing Jeep vehicles in China will file for bankruptcy, the companies said on Monday, after a lengthy decline for the oldest foreign auto brand in the world’s largest market.

Stellantis said in a statement it had fully impaired the value of its investment in the joint venture in its results for the first half of 2022. It also said it would continue to provide service to Jeep customers in China.

GAC, which approved the bankruptcy filing, said the joint venture had liabilities of almost 111% of its assets of 7.3 billion yuan ($1.00 billion). The bankruptcy would not have a significant impact on GAC’s operations, the Chinese company said in a stock exchange filing.

Stellantis terminated the venture with GAC in July, only months after it said it would raise its stake in the business to 75% from 50%.

In the following days, GAC criticised Stellantis and said it was “deeply shocked” by comments from the European carmaker about the end of their joint venture in China.

Sales for the venture, which sold the Jeep Cherokee SUV and the Compass crossover, have been in sharp decline for the past four years. Sales fell by 50% in 2021 from the previous year to 20,396 vehicles.

For 2022, it sold fewer than 2,000 vehicles. In May, it reported selling only a single vehicle.

Bill Russo, head of Shanghai-based consultancy Automobility Ltd and a former Chrysler executive, said the Jeep venture had failed to keep up with changes in the China market and to adapt to customer demands.

“It had every right to be successful in a market that embraced sport-utility vehicles,” he said. “But you can’t be running a 1980s business model when the 21st century has arrived.”

While reporting financial results in July, Stellantis Chief Executive Officer Carlos Tavares said that over the last five years “the political influence” in doing business with its partners in China was growing. He said then he did not see a major long-term impact from the company’s decision to break the joint venture.

Earlier this month, Tavares said Chinese automakers should be subject to the same tariffs when exporting cars to Europe as European brands face when exporting to China.

Foreign automakers as a group have been under growing pressure in China, where the market has shifted quickly to battery-electric vehicles and domestic brands have been taking market share.

Foreign automakers saw their share of China’s auto market, now the world’s largest, drop by 5.5 percentage points last year, to 45.6%, according to the China Passenger Car Association.

The joint-venture model, which China had insisted on as a condition of investment by foreign automakers, is under threat, said Chee-Kiang Lim, managing director China at Detroit-based consultancy Urban Science.

“The joint-venture policy was originally designed to compel foreign brands to share their brands and technology with local Chinese (automakers) in exchange for access to China’s large, growing auto market,” he said.

Now that Chinese automakers are more “confident that they have closed the gaps with or even surpassed their foreign partners,” he said, “we have to expect more JVs to unwind in the coming years.”

The bankruptcy for the Jeep venture is the latest chapter in a turbulent history for the first foreign brands to have invested in China, when it was an almost non-existent market for global automakers.

The former AMC invested in a Beijing Jeep joint venture in 1984, the first such deal for vehicle production in China by an American brand.

The operation went through ownership changes after AMC was acquired by Chrysler and then Chrysler was acquired by Fiat, which became Stellantis in 2021 after a merger with Peugeot.

Tesla is the only global automaker that was granted a waiver to produce cars in China without a joint venture.

($1 = 7.2660 Chinese yuan)

(Reporting by Juby Babu in Bengaluru, Zhang Yan in Shanghai and Norihiko Shirouzu in Beijing; Writing by Kevin Krolicki; Editing by Rashmi Aich, Stephen Coates, Gerry Doyle and Edmund Klamann)

By John Revill

ZURICH (Reuters) -The Swiss National Bank lost 142.2 billion Swiss francs ($142.60 billion) in the first nine months of 2022, it said on Monday, as rising interest rates and the stronger Swiss franc slashed the value of the central bank’s foreign investments.

The loss – the largest in the SNB’s 115-year history – was slightly more than the annual economic output of Morocco ($132 billion), but the central bank does not face bankruptcy thanks to its ability to create money.

The SNB made a loss of 141 billion francs from its foreign-currency positions as the bonds and stocks bought during its campaign to stem the appreciation of the safe-haven franc slid in value.

The figure included exchange rate-related losses of 24.4 billion as the stronger franc further reduced the value of its holdings, which include stakes in coffee retailer Starbucks and Google owner Alphabet.

Gold holdings lost 1.1 billion francs in value.

“These losses may sound like a lot, but the SNB is not a normal company,” said UBS economist Alessandro Bee.

“The problem is the stagflationary environment where equities lose, bonds lose, gold loses and the Swiss franc becomes stronger. Normally bonds and gold gain when equities lose. But that’s not happened in 2022.”

“Normal bankruptcy rules” do not apply, he added, noting that the SNB, which made a 41.4 billion franc profit a year earlier, would always be liquid as long as there is demand for Swiss francs.

The loss could, however, mean that the central bank halts payouts to the Swiss federal and cantonal governments next year.

Canton Zurich received 716 million francs as its share of the 6 billion francs distributed by the SNB this year, but said it knew there was no guarantee of the central bank cash.

Nearby canton Zug said omitting an SNB payout would be no problem.

“The SNB is not a normal bank, it’s a central bank which has other tasks such as price stability and protecting the Swiss economy,” Heinz Taennler, Zug’s finance director, told Reuters.

“We are not dependent on the payment from the SNB, but I can’t say if that’s the case for other cantons.

Continued massive losses could wipe out the SNB’s equity, which stood at 204 billion francs at the end of 2021.

The SNB, which has recently started hiking interest rates to combat inflation, declined to comment on the loss or what it would mean for a payout or its more restrictive monetary policy.

Still, Vice Chairman Martin Schlegel indicated a slide into negative equity would not alter the central bank’s approach. He also expected a positive long-term return on the bank’s investments.

“We can pursue our tasks and fulfill our mandate even with negative equity capital,” he said in an interview published on Friday.

“Nevertheless, it is important that we have enough equity. It helps the credibility of a central bank if it is well capitalized.”

($1 = 0.9972 Swiss francs)

(Reporting by John Revill, Editing by Miranda Murray, Kirsten Donovan)

BEIJING/HONG KONG (Reuters) -L Catterton, the private equity firm backed by luxury goods empire Louis Vuitton Moet Hennessy, said on Monday it aimed to raise 2 billion yuan ($275.44 million) for its first yuan-denominated fund, as it eyes early-stage investments in China.

L Catterton, which has invested in Chinese soft drink brand Genki Forest and premium pet food provider Shanghai Enova Pet Products, said the new fund has received capital from unidentified local Chinese government body and international and overseas companies in the consumer sector.

The yuan-denominated fund, for which the first-close has completed, will focus on investing in early-stage firms in the consumer sector for its first phase, according to a Chinese statement published by L Catterton in the social media platform WeChat.

The new fund has raised “around 1 billion yuan” at first-close, a source familiar with the matter said.

Private equity funds typically begin investing after their first-close, when they have received an initial round of commitments from investors.

L Catterton declined to comment on a Reuters request.

The first phase of the fund will be based in the southwestern Chinese city of Chengdu, according to the statement.

($1 = 7.2611 Chinese yuan renminbi)

(Reporting by Roxanne Liu and Kane Wu; Editing by Shri Navaratnam and Rashmi Aich)

By Satoshi Sugiyama

TOKYO (Reuters) – Toyota Motor Corp is expected to report a small quarterly profit increase on Tuesday, with soaring costs of parts and materials nearly offsetting the benefits from the plunging Japanese yen and a rebound in production.

The world’s biggest automaker by sales said last week its global production rebounded by 30% in the quarter that ended in September, but warned shortages of semiconductors and other components would continue to constrain output in coming months.

A gradual improvement in the auto chip shortage situation should help raise output in the second half of the current fiscal year, but investors’ focus will shift to demand outlook, other potential disruptions in the supply chain and its electric vehicle strategy when Toyota reports earnings.

“The point to look out for is why there has been such a gap in the supply chain process,” said Kohei Takahashi, an analyst at UBS Securities Japan, noting improvement in chip supplies.

“It has been too long for the same reason, so something new must be emerging,” he said.

Toyota warned earlier this month that it is unlikely to meet its 9.7 million vehicle production goal for this financial year due to a scarcity of chips. It did not provide a new forecast.

The company is expected to report a 3% increase in July-September operating profit to 772.22 billion yen ($5.3 billion), its highest since the December quarter, according to the average estimate in a poll of 12 analysts by Refinitiv.

It will be the first profit increase in three quarters and mark a big improvement from a sharper-than-expected 42% plunge in June quarter profit, partly helped by the yen which has further extended its loss.

The yen plunged around 30% this year against the U.S. dollar, boosting the value of Toyota’s overseas sales. Toyota adjusted its yen forecast for the year to 130 yen from 115 yen following the first quarter results, but the currency is now trading much lower at around 146 to the dollar.

The benefits of the cheap yen has been offset by soaring input costs. Toyota estimated in August material cost for the full year to be 1.7 trillion yen, a 17% increase.

Toyota’s shares are down about 2% this year, compared with the roughly 4% drop in the Nikkei average.

Toyota and its major Japanese rivals, Nissan Motor and Honda Motor, are also grappling with longer term challenges including their slow push into electric vehicles.

Just a year into its $38 billion EV plan, Toyota is already considering rebooting it to better compete in a market growing beyond its projections, Reuters reported this month.

It also had to recall its first mass-produced all-electric vehicle after just two months on the market due to safety concerns earlier this year. It restarted taking leasing orders this month.

($1 = 146.4200 yen)

(Reporting by Satoshi Sugiyama; Editing by Muralikumar Anantharaman)