The week in investor relations: Crypto chaos, London market falls and EU stocks respond to Poland missile scare
– As crypto companies falter, more retail money is getting trapped. said Bloomberg (paywall) in a report. In the wake of FTX’s collapse, contagion is spreading across the industry. Crypto lender BlockFi, which has suspended customer withdrawals, is reportedly preparing to file for bankruptcy. The flood of investors who poured money into crypto as prices soared last year are facing an existential crisis, as the implosion of FTX reverberates through the industry. Recovering money from troubled crypto companies is a long and complicated process, with insolvency proceedings taking months or even years to resolve. And customers are becoming increasingly worried about when – if ever – they’ll be able to access their money.
– Institutional investors, however, seemed to be taking advantage of the ‘extreme price weakness’ seen in the cryptocurrency space after the collapse of FTX and its sister company Alameda Research. That’s according to cryptoglobe.com, reporting on CoinShares’ Digital Asset Fund Flows research. According to the report, cryptocurrency investment products saw their largest inflows in 14 weeks last week, totaling $42 mn. The inflows, the firm wrote, started later in the week after crypto prices collapsed over FTX’s liquidity crisis.
– Stocks fell in the US on Thursday as interest rates jumped, with Fed officials signaling that interest rate hikes to slow inflation are far from over, according to CNBC. The Dow Jones industrial average dipped 0.7 percent, the S&P 500 slipped 1.2 percent and the Nasdaq Composite dipped 1.4 percent. St Louis Fed president James Bullard said in a speech Thursday that ‘the policy rate is not yet in a zone that may be considered sufficiently restrictive. The change in the monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023.’
– Meanwhile, split control of the US Congress following the mid-term elections may provide a tailwind for stocks at the end of a bruising year, noted Reuters. Quoting investors, however, it added that inflation and the Fed are likely to remain the market’s main drivers. ‘For the economy and markets, it is policy that drives outcomes, rather than politics,’ said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. A split government ‘makes major policy changes unlikely, and that stability in policy tends to be reassuring for investors.’
– On the other side of the Atlantic, London lost is position as the most valuable European stock market, reported the BBC, citing data from Bloomberg. A weak pound, fears of recession in the UK and surging sales at French luxury goods makers were thought to be behind the shift. It’s the first time Paris has overtaken London since records began in 2003.
– The UK economy is now in recession, said chancellor Jeremy Hunt during his autumn statement on Thursday. The government is extending the windfall tax on oil and gas companies operating in the North Sea; the levy was introduced in May, noted the BBC, but will increase to 35 percent from January 2023 and stay in place for five years. Reporting on the same news, Energy Voice said electricity generators and North Sea oil firms are to be hit by a £54 bn ($64.4 bn) windfall tax. Industry sources reacting to the announcement said: ‘This threatens to drive investment out of the UK altogether.’
– In ESG-related news, financial market participants want more regulations and better supervision to help curb exaggerated ESG claims, according to Bloomberg. Its survey of ESG-related issues found that 53 percent of 550 Bloomberg Terminal users want more rules to help them tackle environmental issues. Europeans were more in favor of extra regulations than Americans, while both regions gave green issues priority over social or governance matters.
– The head of Canada’s $400 bn pension fund said he’s willing to cut ties with firms that aren’t committed to their net-zero targets, according to Yahoo! News (via Bloomberg). While the Canada Pension Plan Investment Board doesn’t believe divestment is the right path forward, it will do so if other efforts fail, CEO John Graham said on a panel at the Bloomberg New Economy Forum in Singapore. The Toronto-based pension fund is one of the world’s largest institutional investors in private equity, with billions invested directly and through funds. The firm has said it will consider voting against all directors at companies where there are oversight failures related to climate change, board gender diversity and deficient corporate governance.
– European markets opened lower on Wednesday after an explosion in a Polish border village killed two people, reported the Evening Standard. It was originally unclear what caused the explosion but, as the evening wore on, evidence in photos from the site suggested the event might have been caused by an air defense missile, potentially launched by Ukraine. MarketScreener reported via Reuters that Russian markets opened flat on Thursday as NATO escalation fears faded. Russian stocks saw volatile trade earlier in the week as the West scrambled to investigate the cause of the missile hit, with NATO holding an emergency meeting. But the Kremlin praised Washington’s ‘restrained’ response to the incident and Russian markets quickly recovered initial losses.
– AFP’s Digital Journal reported earlier this week that Chinese e-commerce giant Alibaba reported a loss of 20.6 bn yuan ($2.89 bn) for the third quarter, as the company grappled with an economic slowdown and an anti-monopoly crackdown. The heavy net loss attributable to ordinary shareholders was primarily due to a ‘decrease in market prices of our equity investments in publicly traded companies’, among other factors, the company said in a statement. Alibaba’s performance is widely seen as a gauge of Chinese consumer sentiment, given its market dominance.