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Exclusive: Behind FTX’s fall, battling billionaires and a failed bid to save crypto

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Nov 10 (Reuters) – (This story contains language some readers may find offensive in paragraph 2)

On Tuesday morning, Sam Bankman-Fried, owner of cryptocurrency exchange FTX, caught his employees off-guard with a somber message.

“I’m sorry,” he told them. “I fucked up.”

The reason for the mea culpa: His announcement half an hour earlier that FTX’s arch-rival, Binance, planned to mount a shock takeover of its main trading platform to save it from a “liquidity crunch.” Binance founder Changpeng “CZ” Zhao, whom the billionaire had accused of sabotage, would now be his White Knight.

The seeds of FTX’s downfall were sown months earlier, stemming from mistakes Bankman-Fried made after he stepped in to save other crypto firms as the crypto market collapsed amid rising interest rates, according to interviews with several people close to Bankman-Fried and communications from both companies that have not been previously reported.

Some of those deals involving Bankman-Fried’s trading firm, Alameda Research, led to a series of losses that eventually became his undoing, according to three people familiar with the company’s operations.

The interviews and messages also shine new light on the bitter rivalry between the two billionaires, who in recent months competed for market share and publicly accused each other of seeking to hurt the one another’s businesses. It culminated on Wednesday, with Binance pulling out of its deal and throwing FTX’s future into uncertainty.

Stuck without a buyer, Bankman-Fried was now searching for alternative backers, two people close to him said. After Binance pulled out, he told FTX staff in a message that Binance had not previously told them of any reservations about the deal and he was “exploring all options.”

Neither Binance nor FTX responded to requests for comment. Bankman-Fried told Reuters on Tuesday that “I’ll probably be too swamped” to do interviews. He didn’t respond to further messages.

Binance earlier said it decided to pull out of the deal as a result of its due diligence on FTX and news reports about U.S. investigations into the company.

Zhao’s unveiling of the planned takeover capped a stunning reversal for Bankman-Fried. The 30-year-old had set up Bahamas-based FTX in 2019 and led it to become one of the largest exchanges, accumulating a near $17 billion fortune.

News of the liquidity crunch at FTX – valued in January at $32 billion with investors including SoftBank and BlackRock – sent reverberations through the crypto world.

The price of major coins plummeted, with bitcoin slumping to its lowest in almost two years, heaping further pain on a sector whose value has fallen about two-thirds this year as central banks tightened credit.

By ditching the deal, Binance had also avoided the regulatory scrutiny that would likely have accompanied the takeover, which Zhao had flagged as a likelihood in a memo to employees that he posted on Twitter.

Financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. The U.S. Justice Department is investigating Binance for possible money laundering and criminal sanctions violations. Reuters reported last month that Binance had helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series of articles this year by the news agency on the exchange’s financial crime compliance.

RELATIONSHIP SOURS

Zhao and Bankman-Fried’s relationship began in 2019. Six months after FTX’s launch, Zhao bought 20% of the exchange for about $100 million, a person with direct knowledge of the deal said. At the time, Binance said the investment was “aimed to grow the crypto economy together.”

Within 18 months, however, their relationship had soured.

FTX had grown rapidly and Zhao now viewed it as a genuine competitor with global aspirations, former Binance employees said.

When FTX in May 2021 applied for a license in Gibraltar for a subsidiary, it had to submit information about its major shareholders, but Binance stonewalled FTX’s requests for help, according to messages and emails between the exchanges seen by Reuters.

Between May and July, FTX lawyers and advisors wrote to Binance at least 20 times for details on Zhao’s sources of wealth, banking relationships, and ownership of Binance, the messages show.

In June 2021, however, an FTX lawyer told Binance’s chief financial officer that Binance wasn’t “engaging with us properly” and they risked “severely disrupting an important project for us.” A Binance legal officer responded to FTX to say she was trying to get a response from Zhao’s personal assistant, but the requested information was “too general” and they may not provide everything.

By July of that year, Bankman-Fried had tired of waiting. He bought back Zhao’s stake in FTX for about $2 billion, the person with direct knowledge of the deal said. Two months later, with Binance no longer involved, Gibraltar’s regulator granted FTX a license.

That sum was paid to Binance, in part, in FTX’s own coin, FTT, Zhao said last Sunday – a holding he would later order Binance to sell, precipitating the crisis at FTX.

Reuters Graphics

“TRYING TO GO AFTER US”

This May and June, Bankman-Fried’s trading firm, Alameda Research, suffered a series of losses from deals, according to three people familiar with its operations. These included a $500-million loan agreement with failed crypto lender Voyager Digital, two of the people said. Voyager filed for bankruptcy protection the following month, with FTX’s U.S. arm paying $1.4 billion for its assets in a September auction. Reuters could not determine the full extent of losses Alameda suffered.

Seeking to prop up Alameda, which held almost $15 billion in assets, Bankman-Fried transferred at least $4 billion in FTX funds, secured by assets including FTT and shares in trading platform Robinhood Markets Inc, the people said. Alameda had disclosed a 7.6% share in Robinhood that May.

A portion of these FTX funds were customer deposits, two of the people said, though Reuters could not determine their value.

Bankman-Fried did not tell other FTX executives about the move to prop up Alameda, the people said, adding he was afraid that it could leak.

On Nov. 2, however, a report by news outlet CoinDesk detailed a leaked balance sheet that allegedly showed that much of Alameda’s $14.6 billion in assets were held in FTT. Alameda CEO Caroline Ellison tweeted that the balance sheet was merely for a “subset of our corporate entities,” with over $10 billion of assets not reflected. Ellison did not return requests for comment.

That failed to douse growing speculation over what Alameda’s financial health might mean for FTX.

Then Zhao said Binance would sell its entire share in the token, FTT, worth at least $580 million, “due to recent revelations that have come to light.” The token’s price collapsed 80% over the next two days and a torrent of outflows from the exchange gathered pace, blockchain data show.

WITHDRAWAL SURGE

In his message to staff this week, Bankman-Fried said the firm saw a “giant withdrawal surge” as users rushed to withdraw $6 billion in crypto tokens from FTX in just 72 hours. Daily withdrawals normally totaled tens of millions of dollars, Bankman-Fried told his employees.

After Zhao’s tweet that Binance would sell its FTT holding, Bankman-Fried projected confidence that FTX would weather its rival’s attacks. He told staff on Slack that withdrawals were “not shockingly, way up,” but they were able to process the requests.

“We’re chugging along,” he wrote. “Obviously, Binance is trying to go after us. So be it.”

But by Monday the situation became dire. Unable to quickly find a backer, or sell other illiquid assets short-notice, Bankman-Fried contacted Zhao, according to a person familiar with the call. Zhao later confirmed that Bankman-Fried had called him.

Bankman-Fried signed a non-binding letter of intent for Binance to buy FTX’s non-U.S. assets. This valued FTX at several billion dollars, two people familiar with the letter said – enough for the exchange to cover all withdrawal requests but a fraction of its January valuation.

Zhao announced the potential deal several hours later, with Bankman-Fried tweeting “a huge thank you to CZ.”

“Let’s live to fight another day,” Bankman-Fried told staff on Slack.

His employees were shocked. Even executives had been in the dark about the Alameda shortfall and takeover plan until Bankman-Fried informed them that morning, two people working with him said. Both people said they had been unaware that the withdrawal situation was so serious.

Then came Binance’s announcement on Wednesday scrapping the takeover. “The issues are beyond our control or ability to help,” Binance said. Zhao tweeted “Sad day. Tried,” with a crying emoji.

Reporting by Angus Berwick in New York and Tom Wilson in London; additional reporting by Hannah Lang in Washington and Elizabeth Howcroft in London; Editing by Paritosh Bansal and Chris Sanders

Our Standards: The Thomson Reuters Trust Principles.

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World

German go-ahead for China’s Cosco stake in Hamburg port unleashes protest

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  • Green light for Cosco investment divides lawmakers
  • No management or strategic decisions for Cosco
  • China’s foreign minister: hope for ‘pragmatic cooperation’
  • Opposition against deal within coalition parties

BERLIN, Oct 26 (Reuters) – The German cabinet allowed China’s Cosco to buy a stake in a terminal in the country’s largest port on Wednesday in a decision pushed through by Chancellor Olaf Scholz that triggered unprecedented protest within the governing coalition.

With the support of Scholz’s Social Democrat-led ministries, the cabinet approved a 24.9% stake investment by Cosco in one of logistics firm HHLA’s (HHFGn.DE) three terminals in the Hamburg port.

The approved investment is less than the initially planned 35% stake that the Chinese shipping giant and HHLA had aimed for and does not give Cosco any say in management or strategic decisions.

But the painful experience of being too dependent on Russian gas has changed many politicians’ attitude towards strategic foreign investment. The foreign ministry was so upset over the approval that it drew up a note on the cabinet meeting documenting its rejection, Reuters was told by two government sources.

The investment “disproportionately expands China’s strategic influence on German and European transport infrastructure as well as Germany’s dependence on China”, the document, seen by Reuters, says. It points to “considerable risks that arise when elements of the European transport infrastructure are influenced and controlled by China – while China itself does not allow Germany to participate in Chinese ports”.

In the event of a crisis, the acquisition would open up the possibility for China to politically instrumentalise part of Germany’s as well as Europe’s critical infrastructure, it says. The economy ministry and the four ministries led by the liberal Free Democrats joined in drawing up the note, according to the sources.

Scholz, a former mayor of Hamburg, has once again asserted his will against his coalition partners, the Greens and the Free Democrats. After pushing through a nuclear power extension single-handedly last week, the Cosco move fuels discord at home and among European allies who are against the Chinese investment and already see Scholz as increasingly isolated.

Scholz is scheduled to travel to China next week.

HHLA WELCOMES DEAL

HHLA, which is majority-owned by the city of Hamburg and one of the main users of the port, welcomed the deal.

“We appreciate that a solution has been found in objective and constructive talks with the federal government,” said Angela Titzrath, chairwoman of HHLA’s executive board.

It was working on finding an agreement with Cosco on the new conditions in a timely manner, she said.

With the original 35% deal, the German logistics firm had wanted to tie its long-standing shipping customer to Hamburg port in the face of fierce international competition.

Cosco did not immediately reply to a request for comment. A German government source told Reuters that the Chinese company had agreed to the deal.

Chinese foreign ministry spokesperson Wang Wenbin, asked about the deal, said on Wednesday that China hoped “relevant parties would see pragmatic cooperation between China and Germany rationally (and) stop gratuitous speculation”, without giving further details.

Supporters of the HHLA deal say it will allow Hamburg to keep pace with rival ports that are also vying for Chinese trade and some of which are partly owned by Cosco.

Reporting by Andreas Rinke, Jan Schwartz, Eduardo Baptista, Paul Carrel; writing by Rachel More, Kirsti Knolle; editing by Maria Sheahan, Louise Heavens and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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Business

World is in its ‘first truly global energy crisis’ – IEA’s Birol

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SINGAPORE, Oct 25 (Reuters) – Tightening markets for liquefied natural gas (LNG) worldwide and major oil producers cutting supply have put the world in the middle of “the first truly global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

Rising imports of LNG to Europe amid the Ukraine crisis and a potential rebound in Chinese appetite for the fuel will tighten the market as only 20 billion cubic meters of new LNG capacity will come to market next year, IEA Executive Director Fatih Birol said during the Singapore International Energy Week.

At the same time the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as the IEA sees global oil demand growth of close to 2 million bpd this year, Birol said.

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“(It is) especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession…I found this decision really unfortunate,” he said.

Soaring global prices across a number of energy sources, including oil, natural gas and coal, are hammering consumers at the same time they are already dealing with rising food and services inflation. The high prices and possibility of rationing are potentially hazardous to European consumers as they prepare to enter the Northern Hemisphere winter.

Europe may make it through this winter, though somewhat battered, if the weather remains mild, Birol said.

“Unless we will have an extremely cold and long winter, unless there will be any surprises in terms of what we have seen, for example Nordstream pipeline explosion, Europe should go through this winter with some economic and social bruises,” he added.

For oil, consumption is expected to grow by 1.7 million bpd in 2023 so the world will still need Russian oil to meet demand, Birol said.

G7 nations have proposed a mechanism that would allow emerging nations to buy Russian oil but at lower prices to cap Moscow’s revenues in the wake of the Ukraine war.

Birol said the scheme still has many details to iron out and will require the buy-in of major oil importing nations.

A U.S. Treasury official told Reuters last week that it is not unreasonable to believe that up to 80% to 90% of Russian oil will continue to flow outside the price cap mechanism if Moscow seeks to flout it.

“I think this is good because the world still needs Russian oil to flow into the market for now. An 80%-90% is good and encouraging level in order to meet the demand,” Birol said.

While there is still a huge volume of strategic oil reserves that can be tapped during a supply disruption, another release is not currently on the agenda, he added.

ENERGY SECURITY DRIVES RENEWABLES GROWTH

The energy crisis could be a turning point for accelerating clean sources and for forming a sustainable and secured energy system, Birol said.

“Energy security is the number one driver (of the energy transition),” said Birol, as countries see energy technologies and renewables as a solution.

The IEA has revised up the forecast of renewable power capacity growth in 2022 to a 20% year-on-year increase from 8% previously, with close to 400 gigawatts of renewable capacity being added this year.

Many countries in Europe and elsewhere are accelerating the installation of renewable capacity by cutting the permitting and licensing processes to replace the Russian gas, Birol said.

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Reporting by Florence Tan, Muyu Xu and Emily Chow; Editing by Jacqueline Wong and Christian Schmollinger

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Business

Dollar shrugs off suspected yen intervention, Europe clings to Fed hopes

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  • Dollar buffeted vs yen by suspected BOJ intervention
  • European shares rise ahead of earnings-packed week
  • China GDP beats forecasts but retail sales disappoint
  • Pound gains as Sunak emerges as front-runner for PM

LONDON/SYDNEY, Oct 24 (Reuters) – The dollar weathered another suspected blast of Japanese intervention to rise against the yen on Monday, while European markets got a lift from hopes that U.S. interest rates could rise more slowly than previously thought.

The dollar roared to 149.70 yen in early trade before hastily retreating to 145.28 in a matter of minutes in what traders and analysts said appeared to be at the hands of the Bank of Japan. It was last down almost 1% at 149.24.

The Financial Times reported the BOJ may have sold at least $30 billion on Friday to try to protect the yen from yet more weakness, which has sharply lifted the cost of Japan’s imports, particularly for resources.

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Japanese authorities again declined to confirm whether they had intervened, but the price action suggested they had.

Any action to support the yen runs counter to the BOJ’s commitment to controlling Japanese government borrowing costs and could increase the pressure on it to step back on yield curve control at its policy meeting this week.

Sterling, meanwhile, see-sawed in volatile trade on news Boris Johnson had dropped out of the running for British prime minister.

Former finance minister Rishi Sunak, who is the market’s preferred candidate, has emerged as the front-runner for the job, which could reduce some of the political uncertainty hanging over the pound.

The news initially saw sterling jump almost a cent to $1.1402, but it could not hold and was last trading at $1.1328 as investors waited for more clarity on the contest. The leadership could potentially be settled later on Monday if Sunak becomes the only candidate to secure the minimum number of MPs’ votes required to progress.

“The day-to-day is tricky. My favourite expression on all of it this morning is this is a time to be a poker player, not a chess player. It’s all about positioning and sentiment and understanding who you’re playing against,” Societe Generale strategist Kit Juckes said.

Equities mostly extended the bounce that began late in New York on Friday on talk the Federal Reserve was debating when to slow the pace of hikes and might signal a step back at its November meeting.

Markets are still priced for a rise of 75 basis points next month, but have scaled back bets on a matching move in December. The peak for rates has also edged down to around 4.87%, from above 5% early last week.

ECB, BoC SET TO HIKE

Stocks in Europe opened on an upbeat note, with the STOXX 600 up 0.7% on the day, ahead of a week of packed earnings, as 118 companies, including big guns like HSBC (HSBA.L), Unilever (ULVR.L) and TotalEnergies (TTEF.PA) are set to report.

Chinese blue chips (.CSI300) slid almost 3%, while the offshore yuan hit another record low against the dollar after Xi Jinping secured a precedent-breaking third leadership term, picking a top governing body stacked with loyalists. Xi is likely to stick to his zero-COVID policy that is damaging growth, analysts say.

Delayed data on gross domestic product(GDP) showed the Chinese economy grew 3.9% in the third quarter, above forecasts for 3.5%, but retail sales disappointed, with a rise of 2.5%.

Markets now await figures on U.S. GDP due on Thursday and core inflation measures the day after. The economy is forecast to have grown an annualised 2.1% in the third quarter, while the Atlanta Fed GDP Now indicator rose to 2.9% in the latest week, from 2.8%.

Sentiment will also be tested by some major earnings with Apple (AAPL.O), Microsoft (MSFT.O), Google-parent Alphabet (GOOGL.O) and Amazon (AMZN.O) all reporting.

The European Central Bank meets this week and is widely expected to raise its rates by 75 basis points, though it is less clear whether it will signal a further such move in December.

“Although we do not expect any ‘dovish’ policy signal, we maintain a bias towards a lower rate path than currently priced by markets,” said analysts at NatWest Markets in a note.

“We forecast +50bp in December and +25bp in early 2023 to a 2.25% peak,” they added. “There is more uncertainty around QT (quantitative tightening), where beginning sales in Q1 2023 could well be announced.”

The euro was off a fraction at $0.9835 , having briefly been as high as $0.9899 early in the session.

The Bank of Canada is also expected to tighten by 75 basis pointsat its meeting this week.

The possibility of a slowdown in U.S. rate increases helped bonds pare some of their recent heavy losses, with U.S. 10-year Treasury yields easing to 4.16% compared to a 15-year peak of 4.337% on Friday.

In commodity markets, gold was sidelined at $1,654 an ounce .

Oil prices surrendered early gains following soft data on Chinese demand. Brent retreated 42 cents to $93.08 a barrel, while U.S. crude fell 41 cents to $84.64.

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Reporting by Wayne Cole; Editing by Jacqueline Wong, Christopher Cushing and Susan Fenton

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Sports

Benzema, Putellas win Ballon d’Or awards for best players in the world

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  • Real Madrid’s Frenchman Benzema voted best men’s player
  • Barca’s Spain midfielder Putellas picks up women’s award
  • pep Guardiola’s Manchester City chosen as Best Club

PARIS, Oct 17 (Reuters) – Real Madrid’s France forward Karim Benzema won the 2022 Ballon d’Or award for the best men’s player in the world on Monday, while Barcelona’s Spain midfielder Alexia Putellas won the women’s award for a second time.

Benzema, who played a pivotal role in Real’s run to the Champions League title last season, is the first French player to win the trophy since Zinedine Zidane in 1998 and the fifth after Raymond Kopa, Michel Platini and Jean-Pierre Papin.

“This prize in front of me makes me really proud. When I was small, it was a childhood dream, I never gave up… Anything is possible,” Benzema said on stage at the ceremony.

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“There was a difficult period when I wasn’t in the French team but I never gave up. I’m really proud of my journey here. It wasn’t easy, it was a difficult time for my family as well.”

Benzema beat Poland’s Robert Lewandowski, Sadio Mane of Senegal and Belgium’s Kevin De Bruyne after Argentina’s Lionel Messi won the award for a record seventh time last year.

Benzema had a stellar season with Real, scoring 44 goals in 46 games in all competitions as he helped guide them to a LaLiga and Champions League double. His 15 goals in the Champions League guided Real to a record-extending 14th title.

Real made remarkable comebacks from losing positions in the last-16, quarter-finals and semi-finals against Paris St Germain, Chelsea and Manchester City respectively — with Benzema scoring in each of the second legs.

The highlight of their European campaign was the 3-1 win in the second leg against PSG when the Spanish club were 2-0 down on aggregate, with Benzema grabbing a 17-minute hat-trick in the second half to stun the Ligue 1 side.

PUTELLAS WINS AGAIN

Spanish international Putellas won the women’s Ballon d’Or for a second straight year, beating England’s European Championship winner Beth Mead and Australia’s Sam Kerr.

Putellas, who was also named FIFA Best Women’s Player earlier this year, was top scorer in the Champions League last season with 11 goals and scored 18 in the Primera Division.

The 28-year-old missed the Euros for Spain, however, after suffering an anterior cruciate ligament injury on the eve of the tournament in England.

Real’s Thibaut Courtois won the Lev Yashin award for the best goalkeeper last season, with the towering shot stopper making nine saves in the final to keep a clean sheet against Liverpool in a 1-0 victory in Paris.

However, the teams in the Champions League final lost out on the Best Club award, which went to Pep Guardiola’s Manchester City who won a fourth Premier League title in five years.

Barca’s 18-year-old midfielder Gavi picked up the Kopa Trophy for the best under-21 player, while Bayern Munich forward Sadio Mane won the inaugural Socrates award, with the Senegal international recognised for his humanitarian efforts.

Lewandowski did not go home empty handed either as he picked up the Gerd Muller Trophy for the best striker after scoring 50 goals in all competitions for Bayern last season.

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Reporting by Julien Pretot and Rohith Nair; Editing by Ken Ferris

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Business

Asia shares ease, major test looms for UK bonds

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  • https://tmsnrt.rs/2zpUAr4
  • Nikkei down 1.4%, S&P 500 edges up after slide
  • Focus on gilts as BoE buying ends, Truss future in doubt
  • Dollar near 149 yen, market wary of intervention

SYDNEY, Oct 17 (Reuters) – Asian share markets slipped on Monday following another drubbing for Wall Street as investors braced for a further drastic tightening in global financial conditions, with all the risks of recession that brings.

Concerns about financial stability added to the corrosive mix with all eyes on UK bonds, now that the Bank of England’s (BoE’s) emergency buying spree is over.

Prime Minister Liz Truss’ decision to fire her finance minister might help reassure investors, but her own fate is unclear with media reporting Tory lawmakers will try and replace her this week.

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BoE Governor Andrew Bailey warned over the weekend that interest rates might now have to rise by more than thought just a couple of months ago.

“The BoE was doing emergency bond-buying that’s technically identical to QE with one hand, while furiously raising the policy rate with the other,” said analysts at ANZ in a note.

“Monday’s market action will provide a test, not only for the survival of Truss’ low-tax vision, but also her political future.”

Sterling was quoted up 0.4% at $1.1219 , but off the early high with trading sparse in Asia. FTSE futures fell 0.5%, and EUROSTOXX 50 futures 0.6%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 1.2% and back toward last week’s 2-1/2 year low.

Japan’s Nikkei (.N225) shed 1.4% and South Korea (.KS11) 0.1%. Chinese blue chips (.CSI300) dipped 0.4% ahead of GDP data due on Tuesday.

S&P 500 futures edged up 0.4% after Friday’s sharp retreat, while Nasdaq futures added 0.3%.

While the S&P is an eye-watering 25% off its peak, BofA economist Jared Woodard warned the slide was not over given the world was transitioning from two decades of 2% inflation to a time of something more like 5% inflation.

“$70 trillion of ‘new’ tech, growth, and government bond assets priced for a 2% world are vulnerable to these secular shifts as ‘old’ industries like energy and materials surge, reversing decades of under-investment,” he wrote in a note.

“Rotating out of 60/40 proxies and buying what is scarce – power, food, energy – is the best way for investors to diversify.”

INTERVENTION WATCH

A red-hot U.S. consumer price report and rising inflation expectations have markets fully expecting the Federal Reserve to hike rates by 75 basis points next month, and likely by the same again in December.

A host of Fed policymakers are speaking this week, so there will be plenty of opportunity for hawkish headlines. The earnings season also continues with Tesla Inc (TSLA.O), Netflix (NFLX.O) and Johnson & Johnson (JNJ.N) reporting, among others.

Goldman Sachs Group Inc (GS.N) also reports this week and the WSJ reported the investment bank plans to restructure its biggest businesses into three divisions.

In China, the Communist Party Congress is expected to grant a third term to President Xi Jinping, while there could be a reshuffle of top economic roles as incumbents are near retirement age or term-limits.

In currency markets, the dollar remains king as investors price in U.S. rates peaking around 5%.

The yen has been particularly hard hit as the Bank of Japan sticks to its super-easy policy, while authorities refrained from intervention last week even as the dollar sped past the 148.00 level to 32-year peaks.

Early Monday, the dollar was up at 148.73 yen and heading for the next target at 150.00.

The euro was holding at $0.9733 , having put in a steadier performance last week, while the U.S. dollar index eased a fraction to 113.20 .

The rise of the dollar and global bond yields has been a drag for gold, which was stuck at $1,648 an ounce .

Oil prices were trying to bounce, after sinking more than 6% last week as fears of a demand slowdown outweighed OPEC’s plans to cut output.

Brent firmed 64 cents to $92.27 a barrel, while U.S. crude rose 55 cents to $86.16 per barrel.

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Reporting by Wayne Cole; Editing by Himani Sarkar, Ana Nicolaci da Costa and Muralikumar Anantharaman

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Business

Stocks ease as Ukraine attacks and rate outlook spark flight to havens

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  • MSCI global index drops for a fourth day
  • Russian bombings across Ukraine fuel nervousness
  • Markets braced for high core U.S. CPI, earnings season

LONDON, Oct 10 (Reuters) – Global shares dropped on Monday after Russian missiles pounded cities across Ukraine and as renewed concern about the economic outlook sent investors into safe-haven assets such as the dollar and bonds.

Any belief that the Federal Reserve will shift to a softer stance towards monetary policy was extinguished on Friday by data that showed US unemployment fell in September, pointing to a persistently tight labour market.

The dollar held steady against a basket of currencies, while a number of market-based measures of investor risk nervousness showed another increase.

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The Russian missiles killed civilians and knocked out power and heat in cites across Ukraine in apparent revenge strikes after President Vladimir Putin declared a blast on Russia’s bridge to Crimea to be a terrorist attack. read more read more

“I had wondered if markets were looking at the situation in Ukraine and thinking this was moving us toward an end – which was what the first reaction was to the progress that the Ukrainian army had made in the summer. That reaction is no longer happening and this is clearly seen as just an increase in tension, rather than the end of anything,” Societe Generale’s head of currency strategy, Kit Juckes, said.

“We’ve got geopolitical tensions and we’re still on track towards tighter monetary policy in the States and the concern is still by the time they finished tightening, will they have tightened too much and leave the economy looking pretty vulnerable?,” Juckes added.

The MSCI All-World index (.MIWD00000PUS) was last 0.4% lower, down for a fourth day in a row. The pan-European STOXX 600 (.STOXX) fell 0.2%, having skimmed one-week lows, while the FTSE 100 (.FTSE) fell 0.4%.

S&P 500 futures fell 0.3%, while those on the Nasdaq lost 0.4%.

Wall Street sank on Friday after the upbeat payrolls report cemented expectations for another large rate hike. read more

Futures imply a more than 80% chance of rates rising by 75 basis points next month, while the European Central Bank (ECB) is expected to match that and the Bank of England to hike by at least 100 basis points. ,

CORE MEASURE

U.S. consumer inflation is expected to have moderated to an annual 8.1%, but the core measure is forecast to have accelerated to 6.5% from 6.3%. The U.S. CPI data is due on Thursday.

“Whether one number should be the basis for huge swings in markets, it seems inevitable that a notable miss on core on either side could bring about big moves in trading over the coming weeks, so stand by,” Deutsche Bank strategist Jim Reid said.

Minutes of the Fed’s last policy meeting will also be published this week and could offer a steer on rate-setters’ thinking about the likely path of monetary policy.

BONDS GAIN

Although U.S. inflation and the Fed’s response to it remain front and centre of investors’ minds, euro zone government bonds got a boost from the pickup in investor risk aversion.

German 10-year Bund yields , which serve as the region’s benchmark, were steady around 2.195%, while the more sensitive 2-year Schatz fell 7 bps to 1.795%.

Adding another note of caution was a 2% drop in Chinese blue-chip stocks (.CSI300) following a survey that showed the first contraction in services activity in four months. read more

Corporate earnings also kick off on Friday, with JPMorgan, Citi, Wells Fargo and Morgan Stanley reporting results.

The dollar index rose 0.2% to 113.06 , leaving the euro down 0.3% at $0.9707 and the yen flat at 145.465, a whisker away from the recent 24-year high of 145.90 that prompted Japanese intervention.

Sterling fell 0.2% to $1.1066 , after the Bank of England announced a surprise decision to shore up the gilt market ahead of the end of an emergency bond-buying programme on Friday and the government brought forward the publication of independent budget forecasts. [nL8N31B0VI] read more

Oil fell for the first time in a week, as investors took profit on last week’s 11% rally after a deal on supply reductions by OPEC+.

Brent fell 0.6% to $97.30 a barrel, while U.S. crude dropped 0.5% to $92.14 a barrel.

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Additional reporting by Wayne Cole; Editing by Diane Craft, Ana Nicolaci da Costa, Ed Osmond and Andrew Heavens

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Business

Britain’s tax backdown bounces stocks and sterling

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  • Britain scraps small part of tax plan; markets relieved
  • Reserve Bank of Australia surprises with a small hike
  • High VIX; Credit Suisse stock slide point to nerves beneath

SYDNEY, Oct 4 (Reuters) – Asian stocks bounced on Tuesday after Britain scrapped bits of a controversial tax cut plan, tentatively improving global market sentiment and rallying bonds and the pound.

Australia’s central bank added to that sense of relief in markets, surprising investors by lifting interest rates by a smaller-than-expected 25 basis points, saying they had already risen substantially. .

That pushed the Aussie dollar down, lifted the S&P/ASX 200 index (.AXJO) by 3.6% and spurred benchmark 3-year bonds for their best day in 13 years.

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In trade thinned by holidays in China and Hong Kong, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 1.7%, led by gains in Australia.

UK stocks seemed set for a bounce, with FTSE futures up 0.8%.

“It feels short term it’s a little bit oversold,” said Geoff Wilson, chief investment officer at Wilson Asset Management in Sydney.

“Is this the bottom? It’s nearly impossible to pick the bottom, but I don’t think so,” he said, referring broadly to markets.

Japan’s Nikkei (.N225) rose 2.8%. Sterling drifted up to an almost two-week high of $1.1343, making for a bounce now of almost 10% from a record low hit last week after plans for unfunded tax cuts unleashed chaos on British assets.

“The about-face … will not have a huge impact on the overall UK fiscal situation in our view,” said NatWest Markets’ head of economics and markets strategy John Briggs.

“(But) investors took it as a signal that the UK government could and is at least partially willing to walk back from its intentions that so disrupted markets over the past week.”

Investors also took heart from stability at the long end of the gilt market, even though emergency purchases from the Bank of England were only relatively modest.

S&P 500 futures rose 1%, following a 2.6% bounce for the index (.SPX) overnight.

British Finance Minister Kwasi Kwarteng released a statement reversing planned tax cuts for top earners. It makes up only 2 billion out of a planned 45 billion pounds of unfunded tax cuts that had sent the gilt market into a tailspin last week.

South Korea’s Kospi (.KS11) bounced 2.5%, lifting away from last week’s two-year low, despite North Korea’s firing a missile over Japan for the first time in five years.

STERLING BOUNCE

The recovery for sterling has settled some nerves in the currency market, though the persistent strength of the dollar still holds a lot of major currencies near milestone lows and has authorities throughout Asia on edge.

Japan’s yen hit 145 to the dollar on Monday – a level that prompted official intervention last week – and was last at 144.71. The euro was at $0.9838, about three cents stronger than last week’s 20-year trough.

Chinese authorities have rolled out manoeuvres to support the yuan ranging from unusually strong signals to the market to administrative measures that raise the cost of shorting it.

“More volatility is almost certainly assured as FX markets re-focus on U.S. recession risks, which continue to build,” said ANZ senior economist Miles Workman, with U.S. jobs data on Friday the next major data point on the horizon.

The Australian dollar fell to $0.6451 after the central bank meeting. The Reserve Bank of New Zealand meets on Wednesday and the kiwi held just above $0.57.

Treasuries rallied in sympathy with gilts overnight and the benchmark 10-year yield dropped 15 basis points. It was steady in Asia at 3.62%, having briefly poked above 4% last week.

Other indicators of market stress abound. The CBOE Volatility Index (.VIX) remains elevated and above 30. Shares (CSGN.S) and bonds of Credit Suisse hit record lows on Monday as worry about the bank’s restructuring plans swept markets.

Oil held overnight gains on news of possible production cuts, and Brent futures were last up 43 cents to $89.29 a barrel.

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Editing by Sam Holmes

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Business

Q4 off to shaky start as stocks stumble, but oil jumps

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LONDON, Oct 3 (Reuters) – The final quarter of the year got off to a shaky start on Monday, with world stocks languishing at their lowest levels since late 2020 – when the global economy was still reeling from the COVID-19 pandemic.

Oil prices jumped more than 4% as the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, said it would consider reducing output, while sterling rallied after the British government said it would reverse a controversial tax cut that had rocked UK markets.

But sentiment across markets remained frail given worries that aggressive interest rate hikes from the U.S. Federal Reserve and others raise global recession risks.

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European equity markets were a sea of red, with the STOXX 600 index down 0.4%, pulling back from earlier losses of 1.4% (.STOXX). Shares in beleaguered Swiss bank Credit Suisse (CSGN.S) fell around 10% in early trading, reflecting market concern about the group as it finalises a restructuring programme due to be announced on Oct. 27.

Asian stocks mostly fell in holiday-thinned trade although Japanese markets found support on strong energy and semiconductor shares (.N225).

U.S. stock futures were mixed and MSCI’s world equity index (.MIWD00000PUS) fell to its lowest level since late 2020.

News of the British government’s tax U-turn didn’t appear to lift broader sentiment but probably helps to calm market worries about fiscal excess, said Kallum Pickering, senior economist at Berenberg Bank in London.

“Markets seem to have lowered their expectations for the BoE bank rate while gilt yields have fallen further from their recent highs. Less tight financial conditions may ease the near-term shock on economic performance,” said Pickering.

MSCI’s 47-country world stocks index rallied 10% between July and mid-August. But aggressive Fed rate hikes soon came swinging back in, and that index has plunged 15% since, leaving it down 25% and $18 trillion so far this year.

Central banks in Australia and New Zealand meet this week and are expected to deliver further rate increases.

Oil prices rallied on reports what OPEC+ will this week consider cutting output by more than 1 million barrels a day, for its biggest reduction since the pandemic, in a bid to support the market. Brent crude futures rose more than 4% to almost $89 a barrel and U.S. West Texas Intermediate crude was up 4.5%, at $83 a barrel.

UK RESPITE

Britain’s battered pound was up around 0.4% at $1.12085 and its government bond yields fell, pushing their price up, following the UK policy reversal , .

“From a market perspective, it is a good step in the right direction. It will take time for markets to buy the message but it should ease the pressure,” said Jan Von Gerich, chief analyst at Nordea. “Questions still remain and sterling will likely remain under pressure.”

London’s FTSE-100 stock index was down 0.5% (.FTSE), falling in line with other markets.

Japan’s yen meanwhile briefly fell as low as 145.4 to the dollar even as Japan’s finance minister, Shunichi Suzuki, said that the government would take “decisive steps” to prevent sharp currency moves.

It was the first time the yen has fallen through the 145 barrier since Sept. 22, when Japan intervened to prop up its currency for the first time since 1998.

Trade across Asia was generally subdued. South Korea had a national holiday and China entered its “Golden Week” break on Monday. Hong Kong is closed for a public holiday on Tuesday.

Gold was just 0.4% firmer to $1,665.79 an ounce .

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Reporting by Dhara Ranasinghe, additional reporting by Sam Byford in TOKYO; Editing by Hugh Lawson and David Evans

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Business

World stocks edge above Nov 2020 lows, sterling recovers some ground

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  • Dollar eases from 20-year highs reached Monday
  • German 10-year bond yields hit near 11-year highs
  • Oil rallies from Monday’s nine-month lows

LONDON/HONG KONG, Sept 27 (Reuters) – World stocks picked up from 21-month lows on Tuesday and sterling rallied after hitting record lows versus the dollar a day earlier on UK plans for tax cuts, as market slides ran out of steam.

U.S. S&P futures bounced 0.94% after Wall Street fell deeper into a bear market on Monday, benchmark 10-year Treasury yields dipped from the previous session’s 12-year high and the dollar eased from 20-year highs on a basket of currencies.

Markets remain nervous, however, after U.S. Federal Reserve officials on Monday said their priority remained controlling domestic inflation. read more

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“U.S. rate expectations have increased fairly significantly,” said Andrew Hardy, investment manager at Momentum Global Investment Management, though he added that “there’s a huge amount of bearishness already priced into markets”.

Markets are pricing in a 76% probability of a further 75 basis point move at the next Federal Reserve meeting in November.

Central bank speakers on Tuesday include Fed chair Jerome Powell and ECB president Christine Lagarde.

The MSCI world equity index (.MIWD00000PUS) rose 0.29% after hitting its lowest since Nov 2020 on Monday. European stocks gained more than 1% and Britain’s FTSE (.FTSE) rose 0.6%.

Sterling collapsed to a record low $1.0327 on Monday as the government tax cut plans announced on Friday came on top of huge energy subsidies.

The British currency recovered 4.6% from that low to $1.0801 on Tuesday.

After the pound’s plunge, the Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely”. read more

Bank of England Chief Economist Huw Pill will speak on a panel at 1100 GMT.

A lack of confidence in the government’s strategy and its funding also hammered gilts on Friday and again on Monday.

The yield on five-year gilts rose as much as 100 basis points in two trading days, though it slipped off the highs on Tuesday.

“(It) is definitely something that’s unfolding…probably we’re only at a certain initial stage of seeing how the market digests that kind of information,” said Yuting Shao, macro strategist at State Street Global Markets.

“Of course the tax cut plan itself was really aimed to stimulate growth, reduce household burdens, but it does raise the question of what the implications are in terms of the monetary policies.”

Spillover from Britain kept other assets on edge.

Bond selling in Japan pushed yields up to the Bank of Japan’s ceiling and prompted more unscheduled buying from the central bank in response.

The German 10-year bond yield briefly hit a new nearly 11-year high of 2.142%.

Ten-year U.S. bond yields dropped 3.2 bps after reaching a high on Monday of 3.933%.

MSCI’s broadest index of Asia shares outside Japan (.MIAPJ0000PUS) hit a fresh two-year low before bouncing 0.5%. Japan’s Nikkei (.N225) was up 0.5%.

The dollar index eased 0.13% to 113.72, after touching 114.58 on Monday, its strongest since May 2002.

The European single currency was up 0.24% on the day at $0.9629 after hitting a 20-year low a day ago.

Oil rose more than 1% after plunging to nine-month lows a day earlier, amid indications that producer alliance OPEC+ may enact output cuts to avoid a further collapse in prices.

U.S. crude gained 1.4% to $77.70 a barrel. Brent crude rose 1.27% to $85.20 per barrel.

Gold , which hit a 2-1/2 year low on Monday, rose 0.8% to $1,634 an ounce.

Bitcoin broke above $20,000 for the first time in about a week, as cryptocurrencies bounced, along with other risk-sensitive assets. read more

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Reporting by Xie Yu; Editing by Edmund Klamann, Muralikumar Anantharaman and Raissa Kasolowsky

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