By Geoffrey Smith
Investing.com – China’s Covid-19 case count has soared to levels last seen in April, with Guangzhou and Chongqing the new hotspots. The Fed and ECB are prepared to raise interest rates by just 50 basis points at their next meetings, officials say. Zoom Video slips ahead of trading after giving disappointing guidance for the current quarter. Troubled cryptocurrency brokerage Genesis is struggling to overcome a billion-dollar liquidity shortfall, and oil is reeling as two big Gulf producers reject the idea of increased production. This is what you need to know in the financial markets on Tuesday the 22ndNorth Dakota November.
1. China’s covid problems are deepening
China’s Covid-19 case count has returned to levels last seen in April during the outbreak in Shanghai, making the prospect of a relaxation of its Zero Covid policy increasingly remote.
The number of confirmed cases across the country has reached 28,000, with the main manufacturing hubs of Guangzhou in the south and Chongqing in central China being the two hardest-hit cities.
Nomura analysts now estimate that around a fifth of the Chinese economy now operates under some form of Covid-related restriction, even if that doesn’t always mean a strict lockdown. The economic impact of actual restrictive measures is likely to be amplified by the personal decisions consumers make to avoid contracting the disease, analysts warn. That means more trouble for the consumer sector, especially the entertainment and hospitality industries.
2. In the US and the Eurozone, 50 is the new 75
Loretta Mester and Mary Daly joined the list of Federal Reserve officials who have indicated that the Fed will raise at a slower pace going forward, while also warning that the central bank is not done raising yet.
“I don’t think we’re close to stopping,” Cleveland Fed President Mester was quoted as saying by news agencies, adding that market expectations of a spike of around 5% in the fed funds rate are not they were far away.
The San Francisco Fed president was remarkably clear about the risks of Fed policy tightening amid growing signs that the economy is increasingly slowing. Esther George from Kansas City and James Bullard from St. Louis will speak later.
In Europe too, German central bank president Joachim Nagel indicated he would be satisfied with just 50 basis points at the next ECB meeting, saying that such a step would still be “substantial.” Nagel also said that he wants the ECB to start “quantitative tightening” early in the new year.
3. Stocks point to a higher edge; Zoom slips on a weak guide
US stock markets will open modestly higher later, showing signs of slowing ahead of the Thanksgiving holiday.
At 06:25 ET (1125 GMT), they were up 41 points, or 0.1%, while they were up 0.1% and rising by a similar amount.
News from China continues to act as a modest drag on sentiment, while Zoom Video’s (NASDAQ:) weak guidance for the fourth quarter was another reminder of the post-pandemic slide in some tech stocks that have yet to run further. .
Medtronic (NYSE:), Best Buy (NYSE:), Dollar Tree (NASDAQ:), campbell’s soup (NYSE:) and analog devices (NASDAQ:) are set to report earnings early, while HP’s (NYSE:) post-bell update will offer insight into the state of the PC market.
4. Genesis struggles to cover the $1B shortfall
It looks like Crypto’s woes won’t end anytime soon. Genesis, the brokerage firm hampered by the FTX stock market crash, has been forced to deny reports that it is considering filing for bankruptcy, after failing to raise $1B to cover its funding gap, at least so far.
Bloomberg had reported that Genesis, which suspended client withdrawals last week due to liquidity problems, had approached Binance and Apollo Global Management (NYSE:) for a cash injection, but both refused. Neither company publicly confirmed the report, but Genesis told Reuters it has “no imminent plans” to pursue FTX in Chapter 11.
Meanwhile, the trustees of the FTX bankruptcy have located some more cash that could still be bailed out of its ruin, bringing the tally to $1.24 billion, according to the Financial Times. Separate reports indicate that parties linked to its founder, Sam Bankman-Fried, bought more than $120 million worth of property in the Bahamas before its collapse.
5. Oil reels as Saudi Arabia and Kuwait deny production increase report
Crude oil prices have rebounded after Saudi Arabia and Kuwait denied a Wall Street Journal report that the desert kingdom is seeking to urge OPEC to increase production at its next meeting.
At 06:35 ET, prices were up 1.3% at $81.06 a barrel, having previously fallen as low as $75.89 (their lowest since early January), while futures were up 1.3%. at $88.62.
The prospect of even more mobility restrictions in China continues to weigh heavily, but you may find a correction in US inventory data that the American Petroleum Institute is due at 4:30 pm ET, as usual.