A look at the day ahead in U.S. and global markets from Mike Dolan.
Turbulence in oil, China’s COVID crunch and unravelling cryptocurrencies make for uncomfortable reading for investors starting to parse what looks like a recessionary year ahead.
Higher interest rates and slowing economies dominate most 2023 outlooks, not least Tuesday’s latest from the Organisation for Economic Cooperation and Development.
Although it expects the global economy at large to skirt outright recession, the Paris-based OECD said it sees world growth slowing to 2.2% next year from 3.1% in 2022 – with both British and German economies likely to contract in 2023.
Underlining the growth gloom, China’s battle with COVID and its widening curbs only seemed to worsen. Beijing shut parks, shopping malls and museums while more Chinese cities resumed mass testing for COVID-19 as the country reported new infections near April’s peaks.
Although Hong Kong stocks took another outsize hit, downbeat world markets were more mixed on Tuesday as ebbing oil prices – weighed down by China’s woes and world recession fears – went on a wild rollercoaster ride over the past 24 hours.
Brent crude plunged more than 5% to 10-month lows of $82 per barrel at one point late on Monday amid reports OPEC was considering lifting output. But Saudi denials saw it regain all those losses since and it hovered about $88 first thing today.
The U.S. dollar also gave back some of Monday’s sharp gains. San Francisco Federal Reserve President Mary Daly struck a more measured note on Fed tightening by saying on Monday that the real-world impact of the U.S. central bank’s interest rate hikes is likely greater than what its short-term rate target implies.
Pain in the crypto world continued, with many investors fearing the fallout from the collapse of exchange FTX is just beginning.
Bitcoin – which is now down almost 80% over the past year – dropped to a two-year low of $15,481 late Monday. Analysts estimate more than 55% of all the money ever invested in the leading cryptocurrency is now underwater.
Investigations, recriminations and lawsuits across the crypto sector continued. Cryptocurrency lender Genesis said on Monday it has no immediate plans to file for bankruptcy, days after the FTX failure forced it to suspend customer redemptions.
And another worrying development for anyone involved in the area was a rise of lawsuits against sponsors and advertisers of the failed FTX – a shot across the bow to many celebrities, sports teams and corporate advertisers dabbling in crypto.
The Golden State Warriors were sued on Monday by an FTX customer who accused the reigning National Basketball Association champions of fraudulently promoting the now-bankrupt cryptocurrency exchange. And Bloomberg News reporters American football star Tom Brady was being probed by Texas regulators.
In corporate news, Baidu’s third-quarter revenue beat estimates as China’s search engine giant benefited from a recovery in online advertising sales and growth in its cloud and artificial intelligence business.
Key developments that may provide direction to U.S. markets later on Tuesday:
* Philadelphia Federal Reserve’s Nov Non-manufacturing business survey, Richmond Fed Nov business survey, Euro zone Nov consumer confidence
* Cleveland Federal Reserve President Loretta Mester, St. Louis Fed President James Bullard and Kansas City Fed chief Esther George all speak.
* US corporate earnings: Analog Devices, HP, Dollar Tree, Autodesk
* U.S. Treasury sells 7-year notes, 2-year floating rate notes
(By Mike Dolan, editing by Alexandra Hudson mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
