Short overview of 5 things on November 11


The Federal Reserve looked closer to moderating aggressive interest-rate increases after welcome news on inflation, with four officials backing a downshift even as they stressed that monetary policy needs to stay tight. “While I believe it may soon be appropriate to slow the pace of rate increases so we can better assess how financial and economic conditions are evolving, I also believe a slower pace should not be taken to represent easier policy,” Dallas Fed President Lorie Logan told a conference hosted by her bank in Houston on Thursday. News of the better-than-expected CPI report sent bond yields plummeting and saw investors harden bets that the Fed would scale back the size of its next rate increase in December to 50 basis points, with rates peaking around 4.8% next year.

Crumbling Empire

Authorities in the Bahamas, where FTX is based, said they froze the assets of its local trading subsidiary and “related parties” as more signs emerged that crypto mogul Sam Bankman-Fried’s empire is teetering. The decision to freeze FTX Digital Markets was “the prudent course of action” to preserve assets and stabilize the company, the Bahamas Securities Commission said in a statement Thursday. Meanwhile, Japan’s government has ordered FTX’s local subsidiary to suspend some of its operations, saying it has no structure in place to properly offer cryptocurrency exchange services to users. It’s been a wild week for FTX as Bankman-Fried struggled to patch a multibillion-dollar shortfall that triggered government probes and set off panic across crypto markets.

Bankruptcy Risk

Elon Musk, in his first address to Twitter employees since purchasing the company for $44 billion, said that bankruptcy was a possibility if it doesn’t start generating more cash, according to people familiar with the matter. The warning came amid a tumultuous start to Musk’s reign at the social media company — a two-week period in which he has fired half of Twitter’s staff, ushered out most of the top executives and ordered the remaining employees to stop working from home. While the buyout has removed Twitter from the scrutiny of public markets, Musk loaded the company with almost $13 billion of debt that’s now in the hands of seven Wall Street banks that have been unable to offload it to investors.

Targeted Approach

China’s top leaders reinforced the need to stick with the Covid Zero policy, while urging officials to be more targeted with their restrictions. In a meeting of the new Politburo Standing Committee chaired by President Xi Jinping, the members — appointed to the supreme leadership body at last month’s Communist Party congress — called for “more decisive” measures to curb the spread of the virus so as to resume normal life and production as soon as possible, according to the Xinhua News Agency. While it’s not the first time Xi and senior leaders in China have urged cadres to be mindful of the economy in their containment measures, it’s the first public comments on the virus by the new Standing Committee.

Coming up…

European equity futures edged up, signalling the global relief rally spurred by cooler-than-expected US inflation might still have some steam left. Several ECB officials speak at events. The EU releases its autumn economic forecast. Expected data include UK trade balance and CPI inflation for Germany and Portugal. Daimler Truck, Grieg Seafood and Hydro One dish up results.


(Source: Bloomberg, Nov. 11-2022)

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