Unemployment rose while equity fell in Brazil
The iShares MSCI Brazil Capped ETF (EWZ) fell 2.02% as the unemployment rate in Brazil rose to 6.90% in June. However, the ADRs (American Depository Receipts) of Brazilian companies like Vale (VALE) and Petrobras (PBR) rose on August 6. They weren’t deterred by the negative economic reading. Vale rose 2.76% and Petrobras rose 2.69%. BRF (BRFS) and Itaú Unibanco Holding (ITUB) fell 1.94% and 1.93%, respectively.
In Brazil, unemployment has been surging since the beginning of the year. From 5.30% in January, the rate reached 6.90% in June, as reported by the Brazilian Institute of Geography and Statistics.
Reining in inflation is another problem for Brazil’s Central Bank. In an attempt to rein in inflation, the Central Bank has been raising Brazil’s key interest rate, also known as the “Selic rate.” However, unemployment has also risen in Brazil. In a recent move, the Central Bank raised the Selic rate by 50 bps (basis points) on July 30. Currently, the Selic rate is at 14.25%. It has risen from 11% in the middle of last year.
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