The oil turmoil, the COVID crisis in China, and the collapse of cryptocurrencies are all elements that make investors uncomfortable as they begin to analyze what is shaping up to be a year of recession.
Rising interest rates and slowing economies dominate most forecasts for 2023, including those released by the Organization for Economic Co-operation and Development on Tuesday.
Although the global economy as a whole is expected to avoid an outright recession, the Paris-based Organization for Economic Co-operation and Development said it expects global growth to slow to 2.2% annually. After that, compared to 3.1% in 2022 – the British and German economies are likely to contract in 2023. .
In confirmation of sluggish growth, China’s battle with the coronavirus and mounting restrictions has only worsened. Beijing closed parks, shopping malls and museums, while other Chinese cities have resumed mass testing for COVID-19, with new infections reported near a peak in April.
Although Hong Kong stocks took another hit, global markets were more mixed on Tuesday as oil prices, weighed down by the China crisis and fears of a global recession, went on a choppy ride in the past 24 hours.
The price of Brent oil fell more than 5% to a 10-month low of $82 a barrel late Monday as OPEC considers increasing production. But the Saudi denial made it recoup all its losses since then and it hovered around $88 in the first hour of the day.
The US dollar also gave up some of its strong gains on Monday. San Francisco Federal Reserve Chair Mary Daley struck a more subtle note about Fed tightening by saying Monday that the real impact of a rate hike by the US central bank is likely to be greater than what its short-term interest rate target would mean.
The pain continues in the cryptocurrency world, as many investors fear that the fallout from the FTX stock exchange crash is only beginning.
Bitcoin – which has now fallen nearly 80% in the past year – fell to a two-year low of $15,481 last Monday. Analysts estimate that more than 55% of all funds invested in the major cryptocurrency are now underwater.
Investigations, accusations, and lawsuits continued across the cryptocurrency industry. Cryptocurrency lender Genesis said Monday it had no immediate plans to file for bankruptcy, days after the FTX bankruptcy forced it to put customer refunds on hold.
Another worrying development for anyone involved in the industry has been the growing number of lawsuits against sponsors and advertisers for the FTX failure — a wake-up call for many celebrities, sports teams, and advertisers from companies that got their start in crypto.
A lawsuit was filed against the Golden State Warriors on Monday by an FTX client who accused the defending National Basketball Association champions of fraudulently promoting the now-bankrupt cryptocurrency exchange. Bloomberg News reporters reported that American football star Tom Brady is under investigation by Texas regulators.
In business news, Baidu’s third-quarter revenue beat estimates, as the Chinese search engine giant benefited from a rebound in online ad sales and growth in its AI and cloud businesses.
Key developments that may guide US markets later in the day:
*November Philadelphia Fed Non-Manufacturing Business Survey, November Richmond Federal Business Survey, November Eurozone Consumer Confidence.
*Cleveland Federal Reserve President Loretta Mester, St. Louis Federal Reserve President James Bullard, and Kansas City Federal Reserve Bank President Esther George speak.
*US company results: Analog Devices, HP, Dollar Tree, Autodesk
* The US Treasury sells 7-year bonds, and 2-year floating-rate bonds