Tag: Recessions and depressions

Asian markets mixed ahead of Fed report, US jobs data

[ad_1]

BEIJING — Asian stock markets were mixed Tuesday ahead of updates on U.S. employment amid fears of a possible global recession.

Shanghai and Hong Kong gained. Seoul and Sydney declined. Oil prices fell.

Coming off a year of big declines for major stock markets, traders worry the Federal Reserve and other central banks that have raised interest rates repeatedly to cool inflation might be willing to push the world into recession.

Inflation might “remain far north of 3% by the end of 2023, simply too high for central bank comfort,” said Stephen Innes of SPI Asset Management in a report.

The Shanghai Composite Index gained 0.2% to 3,094.12 and the Hang Seng in Hong Kong added 0.6% to 19,906.65. Japanese markets were closed for a holiday.

Seoul’s Kospi shed 0.8% to 2,208.36 after South Korea’s 2022 exports fell 9.5% from the previous year and the country recorded its biggest trade deficit ever.

Sydney’s S&P-ASX 200 lost 1.6% to 6,927.20 after Australian house prices fell 1.1% and an index of manufacturing activity decline. Singapore declined while Jakarta advanced. New Zealand markets were closed for a holiday.

This week’s most closely watched data points are notes from the Fed’s latest meeting due to be released Thursday. That will give traders an update on the U.S. central bank’s thinking about the possible need for more rate hikes.

It will be followed Friday by U.S. employment data.

Forecasters expect monthly job gains to decline in December, which they hope might encourage the Fed to dial back plans for more rate hikes. But the Fed has a “clear focus on keeping inflation under check,” which “could still leave pricing data as the key driver of market moves,” Yeap Jun Rong of IG said in a report.

Traders also are looking ahead to corporate earnings reports in mid-January.

Global central banks are trying to extinguish inflation that is at multi-decade highs in many countries. It has been worsened by Russia’s invasion of Ukraine, which disrupted commodity markets and caused oil and wheat prices to spike.

U.S. financial markets were closed Monday for a holiday after Wall Street’s benchmark S&P 500 index ended 2022 down 19.4%, its biggest decline since the 2008 financial crisis. It lost $8.2 trillion in stock value, according to S&P Dow Jones Indices.

Market benchmarks in Germany and France closed higher Monday.

The Fed’s key lending rate stands at a range of 4.25% to 4.5%, up from close to zero after seven increases last year. The U.S. central bank forecasts it will reach a range of 5% to 5.25% by late 2023, with no rate cut before 2024.

In energy markets, benchmark U.S. crude lost 20 cents to $80.06 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.86 on Monday to $80.26. Brent crude, the price basis for international oil trading, shed 26 cents to $85.65 per barrel in London. It added $2.45 the previous session to $85.91.

The dollar declined to 130.17 yen from Monday’s 130.80 yen. The euro edged down to $1.0667 from $1.0700.

[ad_2]

Source link

January 2, 2023
Asian markets mixed after S&P 500 ends worst year since 2008

[ad_1]

BANGKOK — Shares began the year mixed on Monday, with most markets closed for New Year holidays.

This week brings employment data and minutes from the latest meeting of the Federal Reserve as it battles inflation. That will likely remain investors’ overarching concern as 2023 begins with persisting uncertainties over the war in Ukraine and over whether interest rate hikes meant to tame inflation might lead to recession.

South Korea’s Kospi fell 0.1% to 2,233.96 and the Sensex in Mumbai edged less than 0.1% higher, to 60,871.24. Jakarta’s benchmark was lower.

The future for Germany’s DAX was down 0.5%.

U.S. stock markets will be closed Monday in observance of the New Year’s Day holiday.

Over the weekend, a report showed that Chinese manufacturing contracted for a third consecutive month in December, in the biggest drop since February 2020, as the country grapples with a nationwide COVID-19 surge after suddenly easing anti-epidemic measures.

A monthly purchasing managers’ index declined to 47.0 from 48.0 in November, according to data released from the National Bureau of Statistics on Saturday. Numbers below 50 indicate a contraction in activity.

China is in the process of removing strict COVID-19 policies that crimped production for raw materials and goods and discouraged travel. It’s uncertain what impact the reopening will have on the global economy.

The minutes of the Fed’s meeting potentially will give investors more insight into its next moves. The government will also release its November report on job openings Wednesday. That will be followed by a weekly update on unemployment on Thursday. The closely-watched monthly employment report is due Friday.

Wall Street is also waiting on corporate earnings reports, which will start flowing in around the middle of January. Companies have been warning investors that inflation will likely crimp their profits and revenue in 2023, even after they raised prices on everything from food to clothing to offset inflation, helping to pad their profit margins.

On Friday, U.S. markets logged more losses in quiet trading, closing the book on the worst year for the benchmark S&P 500 since 2008.

The S&P 500 fell 0.3% to 3,839.50. It posted a 5.9% loss for the month of December and a 19.4% decline in 2022, or 18.1%, including dividends.

That’s just its third annual decline since the financial crisis 14 years ago and a painful reversal for investors after the S&P 500 notched a gain of nearly 27% in 2021. All told, the index lost $8.2 trillion in value, according to S&P Dow Jones Indices.

The Dow dropped 0.2% on Friday to close at 33,147.25, down 8.8% for the year. The Nasdaq slipped 0.1% to 10,466.48, racking up an annual loss of 33.1%. The Russell 2000 shed 0.3%, ending at 1,761.25.

Stocks struggled all year as pandemic stimulus was withdrawn and inflation put increasing pressure on consumers, raising fears that economies may slip into recession. Central banks raised interest rates to fight high prices.

The Fed’s key lending rate stood at a range of 0% to 0.25% at the beginning of 2022 and closed the year at a range of 4.25% to 4.5% after seven increases. The U.S. central bank forecasts that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

Rising interest rates prompted investors to sell the high-priced shares of technology giants such as Apple and Microsoft and other companies that flourished as the economy recovered from the pandemic.

Amazon and Netflix lost roughly 50% of their market value. Tesla and Meta Platforms, the parent company of Facebook, each dropped more than 60%, their biggest-ever annual declines.

Russia’s invasion of Ukraine worsened inflationary pressure earlier in the year by making oil, gas and food commodity prices even more volatile amid existing supply chain issues. Oil closed Friday around $80, about $5 higher than where it started the year. But in between oil jumped above $120, helping energy stocks post the only gain among the 11 sectors in the S&P 500, up 59%.

In currency dealings, the U.S. dollar rose to 130.93 Japanese yen from 130.89 yen. The euro fell to $1.0697 from $1.0699.

———

AP Business Writers Alex Veiga and Damian J. Troise contributed.

[ad_2]

Source link

January 1, 2023
Asian markets mixed after S&P 500 ends worst year since 2008

[ad_1]

BANGKOK — Shares began the year mixed on Monday, with most markets closed for New Year holidays.

This week brings employment data and minutes from the latest meeting of the Federal Reserve as it battles inflation. That will likely remain investors’ overarching concern as 2023 begins with persisting uncertainties over the war in Ukraine and over whether interest rate hikes meant to tame inflation might lead to recession.

South Korea’s Kospi fell 0.1% to 2,233.96 and the Sensex in Mumbai edged less than 0.1% higher, to 60,871.24. Jakarta’s benchmark was lower.

The future for Germany’s DAX was down 0.5%.

U.S. stock markets will be closed Monday in observance of the New Year’s Day holiday.

Over the weekend, a report showed that Chinese manufacturing contracted for a third consecutive month in December, in the biggest drop since February 2020, as the country grapples with a nationwide COVID-19 surge after suddenly easing anti-epidemic measures.

A monthly purchasing managers’ index declined to 47.0 from 48.0 in November, according to data released from the National Bureau of Statistics on Saturday. Numbers below 50 indicate a contraction in activity.

China is in the process of removing strict COVID-19 policies that crimped production for raw materials and goods and discouraged travel. It’s uncertain what impact the reopening will have on the global economy.

The minutes of the Fed’s meeting potentially will give investors more insight into its next moves. The government will also release its November report on job openings Wednesday. That will be followed by a weekly update on unemployment on Thursday. The closely-watched monthly employment report is due Friday.

Wall Street is also waiting on corporate earnings reports, which will start flowing in around the middle of January. Companies have been warning investors that inflation will likely crimp their profits and revenue in 2023, even after they raised prices on everything from food to clothing to offset inflation, helping to pad their profit margins.

On Friday, U.S. markets logged more losses in quiet trading, closing the book on the worst year for the benchmark S&P 500 since 2008.

The S&P 500 fell 0.3% to 3,839.50. It posted a 5.9% loss for the month of December and a 19.4% decline in 2022, or 18.1%, including dividends.

That’s just its third annual decline since the financial crisis 14 years ago and a painful reversal for investors after the S&P 500 notched a gain of nearly 27% in 2021. All told, the index lost $8.2 trillion in value, according to S&P Dow Jones Indices.

The Dow dropped 0.2% on Friday to close at 33,147.25, down 8.8% for the year. The Nasdaq slipped 0.1% to 10,466.48, racking up an annual loss of 33.1%. The Russell 2000 shed 0.3%, ending at 1,761.25.

Stocks struggled all year as pandemic stimulus was withdrawn and inflation put increasing pressure on consumers, raising fears that economies may slip into recession. Central banks raised interest rates to fight high prices.

The Fed’s key lending rate stood at a range of 0% to 0.25% at the beginning of 2022 and closed the year at a range of 4.25% to 4.5% after seven increases. The U.S. central bank forecasts that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

Rising interest rates prompted investors to sell the high-priced shares of technology giants such as Apple and Microsoft and other companies that flourished as the economy recovered from the pandemic.

Amazon and Netflix lost roughly 50% of their market value. Tesla and Meta Platforms, the parent company of Facebook, each dropped more than 60%, their biggest-ever annual declines.

Russia’s invasion of Ukraine worsened inflationary pressure earlier in the year by making oil, gas and food commodity prices even more volatile amid existing supply chain issues. Oil closed Friday around $80, about $5 higher than where it started the year. But in between oil jumped above $120, helping energy stocks post the only gain among the 11 sectors in the S&P 500, up 59%.

In currency dealings, the U.S. dollar rose to 130.93 Japanese yen from 130.89 yen. The euro fell to $1.0697 from $1.0699.

———

AP Business Writers Alex Veiga and Damian J. Troise contributed.

[ad_2]

Source link

January 1, 2023
Lebanese and UN troops rescue migrants vessel, 2 killed

[ad_1]

Lebanon’s navy and U.N. peacekeepers have rescued more than 200 migrants from a boat sinking in the Mediterranean Sea hours after it left northern Lebanon’s coast, the military said in a statement

BEIRUT — Lebanon’s navy and U.N. peacekeepers on Saturday rescued more than 200 migrants from a boat sinking in the Mediterranean Sea hours after it left northern Lebanon’s coast, the military said in a statement. Two migrants were killed in the incident.

The army statement said the vessel was carrying people “who were trying to illegally leave Lebanon’s territorial waters.” It said three Lebanese navy boats and one from the U.N. peacekeeping force in Lebanon, known as UNIFIL, recused 232 migrants.

Reports from the northern city of Tripoli — Lebanon’s second largest and most impoverished — said Lebanese, Syrian and Palestinian men, women and children were on the boat that left northern Lebanon after midnight Friday. Residents of Tripoli who are in contact with survivors said the dead were a Syrian woman and a Syrian child.

UNIFIL said in a statement that the Maritime Task Force is assisting the Lebanese navy in search and rescue operations in the sea between Beirut and Tripoli “where a boat in distress with a large number of people on board was found. Our Indonesian and Greek ships are on the scene.”

“We will continue to provide assistance,” UNIFIL said.

Lebanese security forces have been working to prevent migrants from heading to Europe at a time when the small nation is in the grips of the worst economic and financial crisis in its modern history.

A crowded boat capsized on Sept. 21 off the coast of Tartus, Syria, just over a day after departing Lebanon. At least 94 people were killed, among them at least 24 children. Twenty people survived and some remain missing.

It was one of the deadliest ship sinkings in the eastern Mediterranean Sea in recent years, as more and more Lebanese, Syrians and Palestinians try to flee cash-strapped Lebanon to Europe to find jobs and stability.

The U.N. High Commissioner for Refugees says risky sea migration attempts from Lebanon over the past year have surged by 73%.

Lebanon’s economic meltdown that began in October 2019, has left three- quarters of the country’s 6 million people, including a million Syrian refugees, living in poverty.

[ad_2]

Source link

December 31, 2022
Ukraine’s debts: US aims to get IMF to reexamine loan fees

[ad_1]

WASHINGTON — A provision in the recently signed defense spending bill mandates that the United States work to ease Ukraine’s debt burden at the International Monetary Fund, which could create tensions at the world’s lender-of-last-resort over one of its biggest borrowers.

The National Defense Authorization Act requires American representatives to each global development bank, including the IMF, where the U.S. is the largest stakeholder, to use “ the voice, vote, and influence ” of the U.S. in seeking to assemble a voting bloc of countries that would change each institution’s debt service relief policy regarding Ukraine.

Among other things, the U.S. is tasked with forcing the IMF to reexamine and potentially end its surcharge policy on Ukrainian loans. Surcharges are added fees on loans imposed on countries that are heavily indebted to the IMF.

The U.S. interest in changing the policy comes as it has distributed tens of billions for Ukrainian military and humanitarian aid since the Russian invasion began in February. Most recently, Ukraine will receive $44.9 billion in aid from the U.S. as part of a $1.7 trillion government-wide spending bill.

Inevitably, some U.S. grant money is spent servicing IMF loans.

“I can see why the Senate would want to relax the surcharge for Ukraine,” Peter Garber, an economist who most recently worked at the global markets research division of Deutsche Bank, wrote in an email. “As the principal bankroller of economic aid for Ukraine, the US would not want to deliver funds only to have them go right to the coffers of the IMF.”

Economists Joseph Stiglitz at Columbia University and Kevin P. Gallagher at Boston University wrote in February about surcharges, saying that “forcing excessive repayments lowers the productive potential of the borrowing country, but also harms creditors” and requires borrowers “to pay more at exactly the moment when they are most squeezed from market access in any other form.”

Other economists say the fees provide an incentive for members with large outstanding balances to repay their loans promptly.

Even with the aid, the beleaguered Ukrainian economy is expected to shrink by 35 percent, according to the World Bank, and the country will owe roughly $360 million in surcharge fees alone to the IMF by 2023.

The effort to wrangle the IMF’s 24 directors, who are elected by member countries or by groups of countries, to end the surcharges may not be so easy.

Just before Christmas, the directors decided to maintain the surcharge policy. They said in a Dec. 20 statement that most directors “were open to exploring possible options for providing temporary surcharge relief,” but others “noted that the average cost of borrowing from the Fund remains significantly below market rates.”

Prominent economists studying the war’s impacts pointed out in a December report — “Rebuilding Ukraine: Principles and Policies,” by the Paris- and London-based Centre for Economic Policy Research — that “some significant voting members may have interests that are not aligned with having Ukraine succeed economically.”

Securing consistent financing to Ukraine could become harder as the war rages on. There are growing fears of a global recession and concerns that European allies are struggling to deliver on their financing promises. In addition, the GOP is set this coming week to take control of the House, with the top Republican, Rep. Kevin McCarthy, saying his party will not write a “blank check” for Ukraine.

Mark Weisbrot, co-director of the liberal Center for Economic and Policy Research in Washington, said the surcharge issue affects not just Ukraine, but also other countries facing debt crises. Among them: Pakistan, hit by flooding and humanitarian crises, as well as Argentina, Ecuador, and Egypt, who together are on the hook for billions in surcharges.

“There is no logic to the IMF imposing surcharges on countries already in crisis,” Weisbrot said, “which inevitably happens because the surcharges are structured to hit countries already facing financial problems.”

He said the issue will become more urgent as Ukraine’s debt grows and the war drags on.

Jeffrey Sachs, an economist and director of the Center for Sustainable Development at Columbia University, said “these surcharges should certainly be eliminated,” adding: “The IMF undercuts its core lender-of-last-resort role.”

[ad_2]

Source link

December 31, 2022
Huawei says it’s out of ‘crisis mode,’ though revenue flat

[ad_1]

Chinese technology giant Huawei says it has pulled itself out of “crisis mode” following years of U.S. restrictions that have stifled its sales in overseas markets, though its revenue for 2022 did not grow from a year earlier

HONG KONG — Chinese technology giant Huawei says it has emerged from “crisis mode” after years of U.S. restrictions that have stifled its overseas sales, even though its revenue for 2022 failed to grow from a year earlier.

“U.S. restrictions are now our new normal, and we’re back to business as usual,” Eric Xu, Huawei’s current chairman, said in a New Year’s message released Friday.

Huawei Technologies Ltd., China’s first global tech brand, has struggled since then-U.S. President Donald Trump blocked its access to U.S. processor chips and other technology in 2019 on grounds that Huawei could facilitate Chinese spying.

Huawei denies accusations that it could be a security risk.

Huawei’s unaudited revenue for 2022 is forecast to be 636.9 billion yuan ($91.6 billion) — nearly unchanged compared to a year earlier and in line with earlier estimates.

Xu said in the message that the firm’s telecommunications network business maintained “steady growth” and that a decline in its devices sector — mainly phones — had abated.

He also said that the firm achieved “rapid growth” in its cloud business.

Huawei did not release more detailed financial figures for its businesses or the firm’s overall profit.

For the coming year, Xu pledged to maintain Huawei’s heavy investment in research and development and said that its cloud business needs to become the “foundation” in driving growth.

He mentioned the pandemic only in passing, praising the company’s “frontline staff outside of China — those who have held the fort to serve our customers despite the adverse impacts of COVID-19 …”

Xu’s message did not mention the recent abrupt end to stringent virus controls or major outbreaks of coronavirus now sweeping China and other countries.

[ad_2]

Source link

December 29, 2022
Applications for US unemployment aid rose slightly last week

[ad_1]

WASHINGTON — The number of people seeking unemployment benefits rose only slightly last week with the labor market remaining strong despite the Federal Reserve’s efforts to cool the economy and hiring.

Applications for unemployment aid for the week ending Dec. 24 climbed 9,000 to 225,000, the Labor Department reported Thursday. The four-week average of applications, which smooths out some of the week-to-week swings, slipped just 250 to 221,000.

Unemployment benefit applications are a proxy for layoffs, and are being closely monitored by economists as the Fed has rapidly raised interest rates in an effort to slow job growth and inflation. Should the Fed’s rate hikes cause a recession, as many economists fear, a jump in layoffs and unemployment claims would be an early sign.

So far, the level of jobless claims remains quite low, evidence that Americans are enjoying a high degree of job security. In the coming weeks, thousands of workers with temporary jobs during the winter holidays will lose work and apply for jobless aid. The government seeks to seasonally adjust the data to account for those job losses, but the adjustments are not always perfect and the layoff of temporary workers could distort the data.

The Fed is seeking to slow job growth and the pace of wage increases as part of its efforts to battle inflation. The central bank has hiked rates seven times this year, which has made it more expensive for consumers to take out mortgage and auto loans, and raised borrowing rates for credit cards.

So far, the interest rate increases have pushed mortgage rates above 6%, essentially double what they were before the Fed began tightening credit. Higher mortgage rates have hammered the housing market, with sales of existing homes falling for 10 straight months.

Yet so far there has been only a limited impact on hiring. Employers added 263,000 jobs in November, a healthy gain, and the unemployment rate stayed at a low 3.7%.

[ad_2]

Source link

December 29, 2022
Asian shares higher in thin holiday trading

[ad_1]

BANGKOK — Shares rose Monday in Asia in thin post-Christmas holiday trading, with markets in Hong Kong, Sydney and several other places closed.

Tokyo’s Nikkei 225 index gained 0.6% to 26,393.32 and the Kospi in Seoul added 0.2% to 2,318.54. The Shanghai Composite index rose 0.5% to 3,061.93 and the SET in Bangkok added 0.6%.

Bank of Japan Gov. Haruhiko Kuroda indicated in a widely watched speech Monday that the central bank does not intend to alter its longstanding policy of monetary easing to cope with pressures from inflation on the world’s third-largest economy.

Last week, markets were jolted by a slight adjustment in the target range for the yield of long-term Japanese government bonds, viewing it as a sign the Bank of Japan might finally unwind its massive support for the economy through ultra-low interest rates and purchases of bonds and other assets.

A widening gap between interest rates in Japan and other countries has pulled the Japanese yen sharply lower against the U.S. dollar and other currencies and accentuated the impact of higher costs for many imported products and commodities.

But the BOJ has kept its key lending rate at minus 0.1%, cautious over risks of recession.

Kuroda told the Keidanren, the country’s most powerful business group, that with economies facing likely downward pressure, and with Japan’s economy not fully recovered from the impacts of the pandemic, the BOJ “deems it necessary to conduct monetary easing and thereby firmly support the economy. …”

On Friday, the S&P 500 reversed a 0.7% loss to close 0.6% higher, at 3,844.82. With one week left of trading in 2022, the benchmark index is down 19.3% for the year.

The Dow Jones Industrial Average rose 0.5% to 33,203.93, while the tech-heavy Nasdaq edged 0.2% higher, to 10,497.86.

Small company stocks also rose. The Russell 2000 index picked up 0.4% to 1,760.93.

Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading ahead of the long holiday weekend. U.S. and European markets will be closed Monday.

Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.

The government reported Friday that a key measure of inflation is continuing to slow, though the inflation gauge in the consumer spending report was still far higher than anyone wants to see. Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected.

Last week’s reports were the last big U.S. economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.

The Fed has said it will keep raising interest rates to tame inflation, even though the pace of price increases has continued to ease. The Fed’s key overnight rate is at its highest level in 15 years, after beginning the year at a record low of roughly zero. The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers have forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.

Given the persistence of high inflation, “many are starting to believe the main story is that there will be no scope for Fed cuts in the year ahead and that central banks will maintain these relatively high rates until underlying inflation is truly cracked — and that process will take time,” Stephen Innes of SPI Asset Management said in a commentary.

The Fed’s forecast doesn’t call for a rate cut before 2024, and the higher rates have raised concerns the economy could stall and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.

In currency dealings, the U.S. dollar slipped to 132.62 Japanese yen from 132.82 yen late Friday. The euro rose to $1.0629 from $1.0614.

[ad_2]

Source link

December 25, 2022
Asian shares higher in thin holiday trading

[ad_1]

BANGKOK — Shares rose Monday in Asia in thin post-Christmas holiday trading, with markets in Hong Kong, Sydney and several other places closed.

Tokyo’s Nikkei 225 index gained 0.5% to 26,367.40 and the Kospi in Seoul added 0.2% to 2,317.48. The Shanghai Composite index surged 0.7% to 3,067.54 and the SET in Bangkok added 0.3%.

Traders were awaiting a speech by the governor of Japan‘s central bank Monday for hints into whether the Bank of Japan might further adjust its longstanding ultra-lax monetary policy to cope with pressures from inflation.

Last week, markets were jolted by a slight adjustment in the target range for the yield of long-term Japanese government bonds, viewing it as a sign the Bank of Japan might finally unwind its massive support for the economy through ultra-low interest rates and purchases of bonds and other assets.

A widening gap between interest rates in Japan and other countries has pulled the Japanese yen sharply lower against the U.S. dollar and other currencies and accentuated the impact of higher costs for many imported products and commodities.

But the BOJ has kept its key lending rate at minus 0.1%, cautious over risks of recession.

On Friday, the S&P 500 reversed a 0.7% loss to close 0.6% higher, at 3,844.82. With one week left of trading in 2022, the benchmark index is down 19.3% for the year.

The Dow Jones Industrial Average rose 0.5% to 33,203.93, while the tech-heavy Nasdaq edged 0.2% higher, to 10,497.86.

Small company stocks also rose. The Russell 2000 index picked up 0.4% to 1,760.93.

Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading ahead of the long holiday weekend. U.S. and European markets will be closed Monday.

Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.

The government reported Friday that a key measure of inflation is continuing to slow, though it’s still far higher than anyone wants to see. The Federal Reserve monitors the inflation gauge in the consumer spending report, called the personal consumption expenditures price index, even more closely than it does the government’s better-known consumer price index.

Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected.

A separate report from the University of Michigan indicating U.S. households are lowering their forecasts for upcoming inflation. That could help avoid a scenario the Federal Reserve has said often it’s desperate to prevent: a vicious cycle where shoppers rush to make purchases in advance of expected price rises, which would only worsen inflation.

The latest round of reports were the last big U.S. economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.

The Fed has said it will keep raising interest rates to tame inflation, even though the pace of price increases has continued to ease. The Fed’s key overnight rate is at its highest level in 15 years, after beginning the year at a record low of roughly zero. The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers have forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.

Given the persistence of high inflation, “many are starting to believe the main story is that there will be no scope for Fed cuts in the year ahead and that central banks will maintain these relatively high rates until underlying inflation is truly cracked — and that process will take time,” Stephen Innes of SPI Asset Management said in a commentary.

The Fed’s forecast doesn’t call for a rate cut before 2024, and the higher rates have raised concerns the economy could stall and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.

In currency dealings, the U.S. dollar slipped to 132.53 Japanese yen from 132.82 yen late Friday. The euro rose to $1.0628 from $1.0614.

[ad_2]

Source link

December 25, 2022
World shares mixed before updates on spending, durable goods

[ad_1]

BANGKOK — Shares rose in Europe on Friday after a retreat in Asia ahead of updates on U.S. consumer spending and durable goods orders.

Benchmarks climbed in London and Paris but fell in Hong Kong, Tokyo and Seoul. Oil prices surged more than $1 a barrel.

Japan reported its core inflation rate, excluding volatile fresh foods, rose to 3.7% in November, the highest level since 1981, as surging costs for oil and other commodities added to upward price pressures in the world’s third-largest economy.

While price increases are much more modest in Japan than in the U.S. and most major European and emerging economies, they add to pressure on the Bank of Japan to adjust longstanding policies that have kept interest rates ultra-low to spur growth. For Japan, deflation — falling prices — rather than inflation has been the key concern for most of the past few decades. Recession in coming months remains a greater concern, economists say.

“Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023,” Capital Economics economist Marcel Thieliant said in a report.

The Fed has already hiked its key overnight rate to its highest level in 15 years. It began the year at a record low of near zero. Many economists and investors expect a recession to hit the U.S. economy in 2023.

Tokyo’s Nikkei 225 index lost 1% to 26,235.25 and the Hang Seng in Hong Kong shed 0.4% to 19,593.06. The Shanghai Composite index dropped 0.3% to 3,045.87 and Australia’s S&P/ASX 200 declined 0.6% to 7,107.70.

In Seoul, the Kospi dropped 1.8% to 2,313.69. Shares also fell in Mumbai and Taiwan but were flat in Bangkok.

Good economic data should be positive for markets when recession may be looming, but the reports Thursday suggested the Federal Reserve may need to keep hiking interest rates and keep them high to curb inflation.

On Friday, the U.S. government will report on personal income and spending and on durable goods orders, among other data.

The Fed is particularly worried about a still-strong job market giving more oxygen to inflation, which has eased a bit in recent months but is still near the highest level in decades. A report Thursday said employers laid off fewer workers last week than expected. Another report showed that the broad U.S. economy expanded at a more robust pace during the summer than earlier estimated.

The S&P 500 fell 1.4% on Thursday after having been down as much as 2.9% earlier in the day. The pullback brings Wall Street’s main measure of health back to a loss of nearly 20% for the year.

The Dow Jones Industrial Average fell 1% and the Nasdaq closed 2.2% lower. The Russell 2000 index dropped 1.3%.

Trading has been topsy-turvy across Wall Street recently as reports paint a mixed portrait of the economy.

High-growth technology stocks have taken some of the year’s worst hits because they’re seen as some of the most vulnerable to rising rates.

Electric vehicle maker Tesla is smarting from rising interest rates and with issues specific to itself and its CEO, Elon Musk. It tumbled 8.9%, bringing its loss for the year to around 64%. It’s taking the rare step of offering discounts on its two top-selling models through year’s end, an indication demand is slowing.

Worries are rising broadly about corporate profits across industries, which are contending with the weight of higher interest rates, still-high inflation and rising costs rise due to payroll and other expenses. Weaker corporate profits could further erode support for stocks, after profits strengthened through much of 2022.

Meanwhile, the housing industry and other areas of the economy whose fortunes are closely tied to low interest rates are suffering.

In other trading Friday, U.S. benchmark crude oil rose $1.50 to $78.99 per barrel in electronic trading on the New York Mercantile Exchange. It fell 80 cents to $77.49 per barrel on Thursday.

Brent crude oil, the pricing basis for international trading, advanced $1.43 to $83.10 per barrel.

The U.S. dollar rose to 132.62 Japanese yen from 132.38 yen. The euro strengthened to $1.0612 from $1.0597.

[ad_2]

Source link

December 23, 2022
How the Fed affects the stock market

[ad_1]

Share

When members of the Federal Reserve make public statements, investors tend to listen. Over the past two decades, central bankers have consistently shared key information about the future trajectory of important inputs like interest rates. The Fed’s forward guidance on interest rates amid historic inflation has taken stock markets for a ride in 2022. As investors wait for a pivot, a panel of experts explains why many in the market choose not to fight the Fed.

[ad_2]

Source link

December 22, 2022
Gold at $4,000? Analysts share their 2023 outlook as inflation, recession fears linger

[ad_1]

Gold prices could surge to $4,000 per ounce in 2023 as interest rate hikes and recession fears keep markets volatile, said Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital.

The price of the precious metal could reach between $2,500 and $4,000 sometime next year, Kiener told CNBC’s “Street Signs Asia” on Wednesday.

There is a good chance the gold market sees a major move, he said, adding “it’s not going to be just 10% or 20%,” but a move that will “really make new highs.”

Kiener explained that many economies could face “a little bit of a recession” in the first quarter, which would lead to many central banks slowing their pace of interest rate hikes and make gold instantly more attractive. He said gold is also the only asset which every central bank owns.

According to the World Gold Council, central banks bought 400 tonnes of gold in the third quarter, almost doubling the previous record of 241 tonnes during the same period in 2018.

“Since [the] 2000s, the average return [on] gold in any currency is somewhere between 8% and 10% a year. You haven’t achieved that in the bond market. You have not achieved that in the equity market.”

Kiener also said investors would look to gold with inflation remaining high in many parts of the world. “Gold is a very good inflation hedge, a great catch during stagflation and a great add onto a portfolio.”

Despite strong demand for gold, Kenny Polcari, senior market strategist at Slatestone Wealth, disagreed that prices could more than double next year.

“I don’t have a $4,000 price target on it, although I’d love to see it go there,” he said on CNBC’s “Street Signs Asia” on Thursday.

Polcari argued that gold prices would see some pullback and resistance at $1,900 an ounce. Prices would be determined by how inflation responds to interest rate hikes globally, he said.

“I like gold. I’ve always liked gold,” he said. “Gold should be a part of your portfolio. I think it is going to do better, but I don’t have a $4,000 price target on it.”

Gold rallied on Tuesday as the U.S. dollar weakened after Japan’s central bank adjusted its yield curve control policy. The announcement caused gold prices to rise 1% above the key $1,800 level, before dipping lower Wednesday as the dollar recovered ground.

China’s a big buyer

When asked if supply is low due to high demand, Swiss Asia Capital’s Kiener said “there’s always supply, but maybe not at the price you want.”

Stock picks and investing trends from CNBC Pro:

But high prices are no match for buyers in China who are paying a premium for the precious metal, he said.

Earlier this month, China’s central bank announced it added about $1.8 billion worth of gold to its reserves, bringing the cumulative value to around $112 billion, Reuters reported.

“Asia has been a big buyer. And if you look at the whole trade, essentially gold is leaving the West, and it’s going into Asia,” he added.

Advice for investors

Nikhil Kamath, co-founder of India’s largest brokerage Zerodha, said investors should allocate 10% to 20% of their portfolio to gold, adding that it’s a “relevant strategy” going into 2023.

“Gold also traditionally has been inversely proportional to inflation, and it has been a good hedge against inflation,” Kamath told CNBC on Wednesday.

“If you look at how much gold you require to buy a mean home in the 70s, you probably require the same or lesser amount of gold today than you did back in the 70s, or the 80s, or the 90s,” he added.

[ad_2]

Source link

December 21, 2022
Asian stock markets sink under global recession fears

[ad_1]

BEIJING — Asian stock markets fell again Monday as investors wrestled with fears the Federal Reserve and European central banks might be willing to cause a recession to crush inflation.

Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices rose.

Wall Street fell Friday after the Fed raised its forecast of how long interest rates have to stay elevated to cool inflation that is near a four-decade high. The European Central Bank warned more rate hikes are coming.

That “hawkish rhetoric” indicates “mounting pipeline risks of a global recession,” said Tan Boon Heng of Mizuho Bank in a report.

The Shanghai Composite Index lost 1.4% to 3,122.63 despite the ruling Communist Party announcing Friday it will try to reverse China’s economic slump by stimulating domestic consumption and the real estate market.

The Nikkei 225 in Tokyo sank 1.1% to 27,223.72 and the Hang Seng in Hong Kong shed 0.6% to 19,326.18.

The Kospi in Seoul retreated 0.6% to 2,344.57 and Sydney’s S&P-ASX 200 was 0.2% lower at 7,134.00.

India’s Sensex opened down 0.8% at 61,337.81. Singapore and Bangkok advanced while New Zealand and other Southeast Asian markets declined.

On Friday, Wall Street’s benchmark S&P 500 index lost 1.1% to 3,852.36 as it turned in its second weekly decline. It is down about 19% this year.

The Dow Jones Industrial Average dropped 0.8% to 32,920.46. The Nasdaq composite lost 1% to 10,705.41.

More than 80% of stocks in the benchmark S&P 500 fell. Technology and health care stocks were among the biggest weights on the market. Microsoft fell 1.7% and Pfizer slid 4.1%.

U.S. inflation has eased to 7.1% over a year earlier in November from June’s 9.1% high but still is painfully high.

The Fed on Wednesday raised its benchmark short-term lending rate by one-half percentage point for its seventh hike this year. That dashed hopes the U.S. central bank might ease off increases due to signs inflation and economic activity are cooling.

The federal funds rate stands at a 15-year high of 4.25% to 4.5%. The Fed forecast that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

In energy markets, U.S. benchmark crude rose 64 cents to $74.93 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.82 on Friday to $74.29. Brent crude, the price basis for international oil trading, gained 68 cents to $79.72 per barrel in London. It lost $2.17 the previous session to $79.04.

The dollar declined to 136.20 yen from Friday’s 136.56 yen. The euro gained to $1.0603 from $1.0600.

[ad_2]

Source link

December 18, 2022
Asian stock markets sink under global recession fears

[ad_1]

BEIJING — Asian stock markets fell again Monday as investors wrestled with fears the Federal Reserve and European central banks might be willing to cause a recession to crush inflation.

Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices rose by almost $1 per barrel but benchmark U.S. crude stayed below $80.

Wall Street fell Friday after the Fed raised its forecast of how long interest rates have to stay elevated to cool inflation that is near a four-decade high. The European Central Bank warned more rate hikes are coming.

That “hawkish rhetoric” indicates “mounting pipeline risks of a global recession,” said Tan Boon Heng of Mizuho Bank in a report.

The Shanghai Composite Index lost 1.3% to 3,127.78 despite China’s ruling Communist Party announcing Friday that it will try to reverse an economic slump by stimulating domestic consumption and the real estate market.

The Nikkei 225 in Tokyo sank 1.1% to 27,218.28 and the Hang Seng in Hong Kong shed 0.7% to 19,316.58.

The Kospi in Seoul retreated 0.4% to 2,350.27 and Sydney’s S&P-ASX 200 was 0.2% lower at 7,137.00. Singapore advanced while New Zealand and other Southeast Asian markets declined.

Wall Street’s benchmark S&P 500 index turned in its second weekly decline after losing 1.1% to 3,852.36 on Friday for its third daily drop. It is down about 19% so far this year.

The Dow Jones Industrial Average dropped 0.8% to 32,920.46. The Nasdaq composite lost 1% to 10,705.41.

More than 80% of stocks in the benchmark S&P 500 fell. Technology and health care stocks were among the biggest weights on the market. Microsoft fell 1.7% and Pfizer slid 4.1%.

U.S. inflation has eased to 7.1% over a year earlier in November from June’s 9.1% high but still is painfully high.

The Fed on Wednesday raised its benchmark short-term lending rate by one-half percentage point for its seventh hike this year. That dashed hopes the U.S. central bank might ease off increases due to signs inflation and economic activity are cooling.

The federal funds rate stands at a 15-year high of 4.25% to 4.5%. The Fed forecast that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

In energy markets, U.S. benchmark crude rose 94 cents to $75.23 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.82 on Friday to $74.29. Brent crude, the price basis for international oil trading, gained $1.01 to $80.05 per barrel in London. It lost $2.17 the previous session to $79.04.

The dollar declined to 136.25 yen from Friday’s 136.56 yen. The euro gained to $1.0609 from $1.0600.

[ad_2]

Source link

December 18, 2022
Asian stock markets sink under global recession fears

[ad_1]

BEIJING — Asian stock markets fell again Monday as investors wrestled with fears the Federal Reserve and European central banks might be willing to cause a recession to crush inflation.

Shanghai, Tokyo, Hong Kong and Sydney declined. Oil prices rose by almost $1 per barrel but benchmark U.S. crude stayed below $80.

Wall Street fell Friday after the Fed raised its forecast of how long interest rates have to stay elevated to cool inflation that is near a four-decade high. The European Central Bank warned more rate hikes are coming.

That “hawkish rhetoric” indicates “mounting pipeline risks of a global recession,” said Tan Boon Heng of Mizuho Bank in a report.

The Shanghai Composite Index lost 1.3% to 3,127.78 despite China’s ruling Communist Party announcing Friday that it will try to reverse an economic slump by stimulating domestic consumption and the real estate market.

The Nikkei 225 in Tokyo sank 1.1% to 27,218.28 and the Hang Seng in Hong Kong shed 0.7% to 19,316.58.

The Kospi in Seoul retreated 0.4% to 2,350.27 and Sydney’s S&P-ASX 200 was 0.2% lower at 7,137.00. Singapore advanced while New Zealand and other Southeast Asian markets declined.

Wall Street’s benchmark S&P 500 index turned in its second weekly decline after losing 1.1% to 3,852.36 on Friday for its third daily drop. It is down about 19% so far this year.

The Dow Jones Industrial Average dropped 0.8% to 32,920.46. The Nasdaq composite lost 1% to 10,705.41.

More than 80% of stocks in the benchmark S&P 500 fell. Technology and health care stocks were among the biggest weights on the market. Microsoft fell 1.7% and Pfizer slid 4.1%.

U.S. inflation has eased to 7.1% over a year earlier in November from June’s 9.1% high but still is painfully high.

The Fed on Wednesday raised its benchmark short-term lending rate by one-half percentage point for its seventh hike this year. That dashed hopes the U.S. central bank might ease off increases due to signs inflation and economic activity are cooling.

The federal funds rate stands at a 15-year high of 4.25% to 4.5%. The Fed forecast that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

In energy markets, U.S. benchmark crude rose 94 cents to $75.23 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.82 on Friday to $74.29. Brent crude, the price basis for international oil trading, gained $1.01 to $80.05 per barrel in London. It lost $2.17 the previous session to $79.04.

The dollar declined to 136.25 yen from Friday’s 136.56 yen. The euro gained to $1.0609 from $1.0600.

[ad_2]

Source link

December 18, 2022
Wall Street may get much worse in 2023 before getting better

[ad_1]

NEW YORK (AP) — The worst may be yet to come for the stock market.

Wall Street’s mini-rebound since mid-October has recovered some of the index’s sharp losses from the first 10 months of the year. It closed Monday a shade below 4,000, up more than 10% since its bottom two months earlier.

Many analysts expect stocks to end 2023 at least around this range, if not a bit higher, after the Federal Reserve finally stops hiking interest rates in order to get high inflation under control. But before getting to that end point, much of Wall Street is also forecasting stock prices to fall sharply in the interim.

Consider Morgan Stanley, which says the S&P 500 could drop all the way to a range between 3,000 and 3,300 during the first three months of the new year. That would mean it loses up to a quarter of its value from Monday’s closing level. The low end of that range would also be 37.5% below the record set in early 2022.

The reason for the bank’s pessimism is that its strategists forecast much weaker corporate profits than the rest of Wall Street. On the revenue side, businesses are feeling pressure as manufacturing and other areas of the economy are weakening. At the same time, Morgan Stanley says profits will get squeezed on the other end by higher wage costs after businesses had to give workers’ raises.

Corporate profits will likely be coming off record levels from 2022, which helped companies return more cash to investors through dividends and stock buybacks.

To be sure, the strategists led by Michael Wilson say the S&P 500 could end 2023 at 3,900 if things go mostly as they expect, not far from its current level.

Strategists at Goldman Sachs also forecast a trough during the first half of the year, possibly at 3,600. That would mark a nearly 10% drop from Monday’s close, and it’s based on Goldman Sachs’ expectation that the economy can avoid a recession.

If the economy does contract as many on Wall Street expect, Goldman strategists led by David Kostin said the S&P 500 could fall all the way to 3,100.

At Deutsche Bank, strategists see the U.S. economy falling into a recession in the second half of 2023. That could pull the S&P 500 down to 3,250 before it hits bottom about halfway through the recession, which the German bank sees lasting the last six months of the year. Then, the S&P 500 could end the year as high as 4,500 if stocks follow their typical playbook around recessions, say the strategists led by Binky Chadha.

[ad_2]

Source link

December 18, 2022
Nobel laureate economist faces sex harassment investigation

[ad_1]

A U.S. university is investigating a Nobel laureate over sexual harassment allegations that the economist’s attorney dismisses as “professional rivalry.”

Philip Dybvig, who shared this year’s Nobel Prize in economics for research into bank failures, has been questioned in the past several weeks by the Title IX office at Washington University in St. Louis, his lawyer Andrew Miltenberg told The Associated Press.

Miltenberg said the allegations are “factually inaccurate.” Dybvig, a longtime banking and finance professor at the university, didn’t immediately respond to an email message seeking comment.

Dybvig, fellow economist Douglas W. Diamond and former Federal Reserve Chair Ben Bernanke won the Nobel Prize in economics in October for research into bank failures — work that built on lessons learned in the Great Depression and helped shape America’s aggressive response to the 2007-2008 financial crisis. The findings in the early 1980s laid the foundations for regulating financial markets, the Nobel panel said.

The Nobel panel at the Royal Swedish Academy of Sciences, in recognizing the three winners, said their research showed “why avoiding bank collapses is vital.”

Bloomberg News reported that it has reviewed emails that show that the Title IX office, which handles campus sexual harassment complaints, has reached out to at least three former students since October to interview them about claims involving Dybvig. They’re among a group of seven former students Bloomberg reported it had spoken with who allege Dybvig sexually harassed them. Most of the women Bloomberg interviewed spoke on the condition of anonymity.

Tore Ellingsen, chair of the Nobel’s Economic Sciences Prize Committee, told Bloomberg that the Royal Swedish Academy of Sciences, which oversees the awards, contacted the university to make sure they had a fair process to handle the accusations.

“As long as the university has not determined that Dybvig has done something wrong, I think we owe him an untarnished celebration of his great scientific achievement,” Ellingsen told Bloomberg.

The Nobel Peace Prize and Foundation didn’t immediately respond to email messages from the AP.

The university didn’t immediately respond Friday to emails and phone messages from the AP. University spokesperson Julie Flory told Bloomberg that the school doesn’t comment on specific cases but takes sexual misconduct seriously and will investigate any allegations.

Miltenberg said he was suspicious of the timing of the allegations, noting that they surfaced after the award was announced but before the scheduled award ceremony.

“We believe,” he said, “that this is a situation of professional rivalry.”

Miltenberg said that Dybvig faces no restrictions and that he already was scheduled not to teach in the spring semester “well in advance” of the allegations arising.

Miltenberg said it is his understanding that the investigation is in the preliminary stages and that the Title IX office wants to speak with Dybvig again.

[ad_2]

Source link

December 16, 2022
Europe hosts southeast Asian leaders as own crises mount

[ad_1]

BRUSSELS — European Union and southeast Asian countries commemorated 45 years of diplomatic ties Wednesday at a summit overshadowed by political distractions in Europe, ranging from the war in Ukraine to a bribery scandal.

EU leaders hosted counterparts from the Association of Southeast Asian Nations, or ASEAN, in a nod to Asia’s economic rise. But the meeting comes at a time of increasing difficulties in the 27-nation European bloc.

“We have to make sure that we have a strong position in our relationship with ASEAN,” Dutch Prime Minister Mark Rutte told reporters in Brussels. “We are talking about worldwide supply chains. We are talking about growth potential.”

The EU is looking for trade and investment possibilities across much of the world, especially in emerging economies, after its economy was battered by the COVID-19 pandemic before the war in Ukraine compounded the problems and put the bloc at risk of a recession.

Disrupted Russian energy supplies have affected financial markets and driven up inflation, driving up the consumer cost of everything from food to heating. Along with seeking out new sources abroad and at home, the EU is weighing devoting extra funds to help businesses in Europe cope with high energy prices and to counter an American subsidy spree.

But the bloc’s struggle to impose a price cap on Russian natural gas and a European Parliament corruption case have distracted attention away from Wednesday’s one-day EU-ÁSEAN summit.

French President Emmanuel Macron, who flew to Qatar to watch France’s semifinal match against Morocco in the World Cup on Wednesday evening, did not attend the event. On the side of the 10-nation ASEAN, Myanmar’s junta leader – Min Aung Hlaing – was absent because the EU refused to invite him.

The other ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The members, ,which together represent 660 million people, rank among the world’s top 10 economies.

High on the agenda was a push for deeper infrastructure ties between the EU and ASEAN, with Europe seeking projects under its “Global Gateway” program that is something of a European answer to China’s “Belt and Road Initiative.”

“In the global world that we are living in today, it is very important that we are connected to like-minded countries,” Estonian Prime Minister Kaja Kallas said.

Both sides also focused on creating more clean energy to fight climate change and on deepening economic relations through greater trade. An EU push more than a decade ago for a free-trade agreement with ASEAN as a whole gave way to targeted deals with individual members.

The EU has negotiated trade pacts with Singapore and Vietnam and is in talks with Indonesia on a similar accord. European free-trade negotiations with Thailand, Malaysia and the Philippines are on hold.

[ad_2]

Source link

December 14, 2022
New FTX CEO says lax oversight, bad decisions caused failure

[ad_1]

WASHINGTON — Sam Bankman-Fried, founder and former CEO of the failed cryptocurrency exchange FTX, helped 1,500 Bahamian investors remove $100 million from their accounts while other customers around the world were locked out of the exchange, according to the company’s new CEO, who testified before a House committee Tuesday

FTX CEO John Ray III, who has guided dozens of companies, including Enron, through bankruptcy restructuring, called FTX’s collapse one of the worst business failures he has seen — a “paperless bankruptcy,” fueled by an “unprecedented lack of documentation.”

For nearly four hours, without a break, Ray told lawmakers about the lack of oversight and financial controls that he discovered since taking over FTX a month ago. He found a loan where Bankman-Fried was both the issuer and the recipient. There were expenses approved by emoji. FTX didn’t have accountants. For record-keeping, employees used QuickBooks, pre-packaged software typically used by small and medium-sized businesses, to manage FTX’s finances.

“Nothing against QuickBooks,” Ray said. “It’s a very nice tool, just not for a multibillion-dollar company.”

At its peak, FTX’s market value topped $30 billion.

Notably absent from the hearing before the House Financial Services Committee was Bankman-Fried, who was arrested in the Bahamas just hours before he was scheduled to testify. The arrest was made at the request of the U.S. government, which on Tuesday announced criminal charges against Bankman-Fried including wire fraud and money laundering.

The timing of Bankman-Fried’s arrest frustrated many committee members. Republican Rep. William Timmons, of South Carolina, called the timing “bizarre” and added that, as a former prosecutor, he couldn’t imagine why any prosecutor wouldn’t want “hours of congressional grilling for the target of an investigation” to help make a case.

FTX filed for bankruptcy protection on Nov. 11, when the firm ran out of money after the cryptocurrency equivalent of a bank run. The collapse of crypto’s second-largest exchange has garnered worldwide attention, and prompted worries in the crypto industry that the pain could become widespread. Ray estimated that about $8 billion of customer funds are missing.

Some customers in the Bahamas, where FTX was based, were able to recover some money, Ray said. That’s because the Bahamian government and Bankman-Fried agreed to let them get their money out of FTX while customers in other countries were blocked from doing so, Ray said.

Ray, who took over FTX on Nov. 11, told the committee that the problems at FTX were a cumulation of months or even years of bad decisions and poor financial controls.

“This is not something that happened overnight or in a context of a week,” he said.

However, Ray didn’t answer numerous questions about what regulations could have stopped the collapse of FTX. Instead, he focused on how unusual FTX was — having no board of directors, having no real structure that prohibited money invested by consumers in FTX to be shifted to Bankman-Fried’s hedge fund Alameda Research for other investments or lavish purchases, without the original investors’ knowledge.

In his prepared remarks, Ray painted a picture of a company acting with little to no oversight.

“FTX Group’s collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets,” Ray said.

In interviews since FTX filed for bankruptcy protection, Bankman-Fried acknowledged that the company lacked proper financial controls and corporate governance, but denied any fraud had been committed.

U.S. prosecutors and financial regulators disagreed with that assessment. An indictment unsealed Tuesday charged Bankman-Fried with a host of financial crimes and campaign finance violations, alleging he played a central role in the rapid collapse of FTX and hid its problems from the public and investors. The Securities and Exchange Commission said Bankman-Fried illegally used investors’ money to buy real estate on behalf of himself and family.

Ray’s comments supported those allegations.

“This is just old fashion embezzlement, taking money from others and using it for your own purposes,” he said. “This is not sophisticated at all.”

A lawyer for Bankman-Fried, Mark S. Cohen, said Tuesday he is “reviewing the charges with his legal team and considering all of his legal options.”

————

Reporter Ken Sweet contributed.

[ad_2]

Source link

December 13, 2022
Asian markets extend Wall St losses; China COVID cases rise

[ad_1]

BANGKOK — Shares slipped in Asia on Monday after last week’s decline on Wall Street, while signs of a surge in coronavirus infections in China suggested progress may be bumpy as it rolls back its “zero-COVID” pandemic restrictions.

Attention was turning to an update on U.S. consumer prices and the Federal Reserve’s last meeting of the year.

The last big piece of data on inflation before the Fed’s next decision is due Tuesday, when economists expect the consumer price index to show inflation slowed to 7.3% last month from 7.7% in October.

Meetings of major central banks including the Fed mean “there is potential for a whole load of volatility in markets; especially given the palpable tensions between inflation risks and fears of policy-induced recession,” analysts at Mizuho Bank said in a commentary.

A survey of Japanese manufacturers showed a sharp deterioration in the outlook, with recession a growing possibility in the U.S. and other major markets. The business survey index fell to minus 3.6% in October-December from 1.7% in the previous quarter as manufacturers grappled with high prices for energy and other raw materials.

Hong Kong’s Hang Seng sank 2.1% to 19,484.88 and the Shanghai Composite index shed 0.7% to 3,186.05.

Tokyo’s Nikkei 225 index gave up 0.2% to 27,835.63 while the Kospi in Seoul lost 0.6% to 2,375.27.

Australia’s S&P/ASX 200 declined 0.4% to 7,181.40.

China was setting up more intensive care facilities and trying to strengthen hospitals as it rolls back anti-virus controls that confined millions of people to their homes, crushed economic growth and set off protests.

The precautions come as the number of cases appeared to be rising, though a sharp reduction in the number of tests makes measuring any changes uncertain.

President Xi Jinping’s government is officially committed to stopping virus transmission, the last major country to try. But the latest moves suggest the ruling Communist Party will tolerate more cases without quarantines or shutting down travel or businesses as it winds down its “zero-COVID” strategy.

A choppy day of trading on Wall Street ended with stocks broadly lower Friday.

The S&P 500 and Nasdaq composite each fell 0.7%, while the Dow Jones Industrial Average dropped 0.9%. Smaller company stocks fell even more, pulling the Russell 2000 index 1.2% lower. The indexes marked their first losing week in the last three.

The S&P 500 finished 3.4% lower for the week and is now down 17.5% this year.

The U.S. government reported that prices paid at the wholesale level were 7.4% higher in November than a year earlier. That’s a slowdown from October’s wholesale inflation rate of 8.1%, but it was still slightly worse than economists expected.

The Fed has been battling inflation by aggressively raising interest rates to raise the cost of borrowing and slow economic activity. The central bank has already hiked its key overnight rate to a range of 3.75% to 4%, up from basically zero as recently as March.

It generally is expected to raise rates by another half percentage point on Wednesday as it wraps up a two-day meeting.

Stocks have recovered some of their losses recently, as inflation has slowed since hitting a peak in the summer. But it remains too high, raising the risk the Federal Reserve will have to keep hiking interest rates sharply to get it fully under control.

In other trading Monday, U.S. benchmark crude oil gained 54 cents to $71.56 per barrel in electronic trading on the New York Mercantile Exchange. It lost 44 cents to $71.02 on Friday.

Brent crude, the pricing basis for international trading, added 40 cents to $76.50 per barrel.

The U.S. dollar rose to 137.03 Japanese yen from 136.60 yen. The euro slipped to $1.0516 from $1.0537.

[ad_2]

Source link

December 11, 2022