Morning Bid: Wild oil ride amid China and crypto woe

Mike Dolan’s look at the day ahead in US and global markets.

Turmoil in oil, China’s COVID crisis and unraveling cryptocurrencies make for uncomfortable reading for investors starting to analyze what looks like a recessionary year ahead.

Higher interest rates and slower economies dominate most 2023 outlooks, not least Tuesday’s latest from the Organization for Economic Co-operation and Development.

Although it expects the global economy overall to weather the recession, the Paris-based OECD said it sees global growth slowing to 2.2% next year from 3.1% in 2022 – with both the UK and German economies likely to 2023 will rally.

Underscoring the growth gloom, China’s battle with COVID and its mounting curbs only seemed to worsen. Beijing closed parks, malls and museums as more Chinese cities resumed mass testing for COVID-19 as the country reported new infections close to April’s peaks.

Although Hong Kong stocks took another big hit, weak global markets were more mixed on Tuesday as falling oil prices – weighed down by China’s woes and global recession fears – went on a wild roller coaster ride over the past 24 hours.

Brent crude fell more than 5% to 10-month lows of $82 a barrel at one point late Monday amid reports OPEC is considering raising output. But Saudi denials have seen it recoup all those losses since then and it’s hovering around $88 today.

The US dollar also gave back from Monday’s sharp gains. San Francisco Federal Reserve President Mary Daly struck a more measured note on Fed tightening, saying Monday that the real impact of the U.S. central bank’s interest rate hikes is likely greater than its short-term rate target implies.

Pain in the crypto world continued, with many investors fearing that the fallout from the collapse of exchange FTX is just beginning.

Bitcoin – now down nearly 80% over the past year – fell to a two-year low of $15,481 late Monday. Analysts estimate more than 55% of all the money ever invested in the leading cryptocurrency is now underwater.

Investigations, accusations and lawsuits in the crypto sector continued. Cryptocurrency lender Genesis said Monday it has no immediate plans to file for bankruptcy, days after the FTX failure forced it to suspend customer redemptions.

And another worrying development for anyone involved in the area has been an increase in lawsuits against sponsors and advertisers of the failed FTX – a shot across the bow for many celebrities, sports teams and corporate advertisers involved in crypto.

The Golden State Warriors were sued Monday by an FTX client who accused the reigning National Basketball Association champions of fraudulently promoting the now-bankrupt cryptocurrency exchange. And Bloomberg News reporters American football star Tom Brady has been investigated by Texas regulators.

In corporate news, Baidu’s third-quarter revenue beat estimates as China’s search engine giant benefited from a rebound in online ad sales and growth in its cloud and artificial intelligence business.

Key developments that could give direction to US markets later on Tuesday:

* Philadelphia Federal Reserve Nov Non-manufacturing business survey, Richmond Fed Nov business survey, Euro zone Nov consumer confidence

* Cleveland Federal Reserve President Loretta Mester, St. Louis Fed President James Bullard and Kansas City Fed chief Esther George are all speaking.

* US corporate earnings: Analog Devices, HP, Dollar Tree, Autodesk

* US Treasury sells 7-year notes, 2-year floating rate notes

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By Mike Dolan, editing by Alexandra Hudson mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed under the Trust Principles to integrity, independence and freedom from bias.

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