FTX Remains Focus Of 'Active' Investigation, Bahamas Attorney General Says

Cryptocurrency

Summary:

Collapsed cryptocurrency exchange FTX remains the subject of "an active and ongoing investigation" by Bahamian authorities, Bahamian Attorney General Ryan Pinder said on Sunday, as he praised the Bahamas' regulatory regime and swiftness with which it responded to the crisis.

FTX, which had been among the world's largest cryptocurrency exchanges, is headquartered in the Bahamas. The firm, whose liquidity crunch forced the company to declare bankruptcy on Nov. 11, is the subject of investigations by Bahamian and U.S. authorities. In mid-November, the Royal Bahamas Police said that government investigators in the Bahamas were looking at whether any "criminal misconduct occurred."

"We are in the early stages of an active and ongoing investigation," Pinder said on Sunday, according to prepared remarks for the speech. "It is a very complex investigation." He said it involved both civil and criminal authorities.

Pinder said that the Bahamas Securities Commission, Financial Intelligence Unit and the police's Financial Crimes Unit would "continue to investigate the facts and circumstances regarding FTX's insolvency crisis, and any potential violations of Bahamian law."

Pinder also defended the Bahamas' regulatory regime and said that its Securities Commission had moved quickly "because of the strength of the legislative framework."

Bahamas securities regulators had revoked FTX Digital's license and began involuntary liquidation proceedings the day before the U.S. bankruptcy case kicked off.

"Any attempt to lay the entirety of this debacle at the feet of the Bahamas, because FTX is headquartered here, would be a gross oversimplification of reality," Pinder said, adding that the Bahamas Securities Commission had moved with "remarkable" speed in response.

Sam Bankman-Fried, 30, founded FTX in 2019 and rode cryptocurrency boom to a net worth that Forbes pegged a year ago at $26.5 billion. Bankman-Fried resigned as FTX's chief executive officer the same day as the firm's bankruptcy filing.

The liquidity crunch came after Bankman-Fried secretly moved $10 billion of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter.

The U.S. Attorney's Office in Manhattan, led by veteran securities fraud prosecutor Damian Williams, in mid-November began investigating how FTX handled customer funds, a source with knowledge of the probe told Reuters. The Securities and Exchange Commission and Commodity Futures Trading Commission also opened probes.

FTX's demise comes after a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network and led some global investors to question the viability of the cryptocurrency sector.

Source: Reuters

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Devin

Economic

British property market activity stalled in October and house price growth slowed to its lowest quarterly level since February 2020 due to a disastrous "mini-budget" and a cost-of-living crisis, a survey released on Monday showed.

Zoopla's house price index said the October slowdown was in part due to the economic plan set out in September by then prime minister Liz Truss, which triggered a sell-off in bond markets.

The spike in mortgage rates in the aftermath of the Truss plan led to a sharp decline in housing activity that real estate group Zoopla said was "more pronounced in new buyer demand than sales agreed".

Buyer demand fell 44% year-on-year in October, while sales volumes were down 28% compared to a year earlier, but on par with the pre-pandemic period, Zoopla said.

Zoopla said it expects mortgage rates to return towards the 4-5% level at the start of 2023 after the cost of 5-year fixed loans eased from a peak above 6% last month.

In annual terms, house price inflation slowed to 7.8%, with quarterly growth at 0.7%, the lowest rate since February 2020.

Zoopla predicts British house price growth to head towards 0% and possibly enter negative territory next year.

"While the outlook for house prices is weak, we see a shift to more needs driven motivations to move in 2023 and beyond which will support sales volumes," Richard Donnell, executive director at Zoopla said.

A rapid rent surge will add to cost of living pressures and add "continued impetus" to first-time buyer demand, he added.

Despite the shocks, the slowdown in the property sector is a "shake-out" rather than the start of a crash, Zoopla said.

A separate survey published on Friday showed property demand has shifted from buying to renting amid financial uncertainty.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Commodity

Energy - price cap decisions

Sentiment in the oil market remains negative, and developments over the weekend in China will certainly not help. China continues to see record daily cases of Covid, which has resulted in some cities tightening mobility restrictions. Reports of Covid protests in China will also likely prove harmful for sentiment.

Unsurprisingly, investor appetite has taken a hit in recent weeks - one only needs to look at the price action to see this. Positioning data adds confirmation to this thesis. The latest exchange data shows that speculators reduced their net longs in ICE Brent by 70,502 lots over the last reporting week, leaving them with a net long of 138,048 lots as of last Tuesday. This is the smallest position held since August. The market appears not to be concerned about the ongoing uncertainty over Russian supply. Instead, attention seems fully focused on the demand story.

Over the weekend the US government relaxed oil sanctions against Venezuela by allowing Chevron to restart oil production at some of its joint ventures in the country. The easing in sanctions will have a limited impact on the market, given that volumes will be relatively small. The easing also appears to allow the export of this crude to the US. This will be helpful for US refiners on the hunt for heavier grades of feedstock.

As for the week ahead, we should start to get some preliminary production numbers for OPEC members for November. This will obviously give a good insight into which members have reduced their output in accordance with the latest OPEC+ supply cuts. OPEC+ agreed back in October to reduce their production targets by 2MMbbls/d from November.

However, the market will likely be closely watching price cap developments this week. EU members failed last week to agree on a level for the price cap for Russian oil. The EU and G-7 will want to come to an agreement this week, before the EU ban on Russian seaborne crude oil kicks in on 5 December. EU members will also have to agree on the proposed price cap on TTF gas futures with the Commission last week suggesting setting the cap at EUR275/MWh, which some members believe is too high.

Metals – Aluminum stocks decline in China

The latest data from the Shanghai Metals Market (SMM) shows that inventories of aluminium ingots have dropped 10% in the last two weeks and currently stand at 51.8kt (the lowest in almost six years) as of Friday. SMM also said that smelters in northern China are reducing output during the winter months to reduce emissions, while a resumption of plants in the southwest (that were forced to halt production due to power shortages) has been slower than expected. Meanwhile, the latest data from the Shanghai Futures Exchange (ShFE) shows that aluminium inventories on exchange dropped by 15kt (-12% WoW) to 110kt - the lowest since 2017.

US miner Freeport-McMoRan agreed with the Chinese copper smelters (Tongling Nonferrous Metals Group Co. and Jiangxi Copper Co.) to set treatment charges at US$88/t (+35% YoY) for copper concentrate supply agreements for 2023. The higher treatment charges indicate expectations of rising mine supply relative to smelting capacity. There are suggestions that two big mines - Quellaveco in Peru and the Quebrada Blanca 2 project in Chile, will roughly add 616kt of copper to the market once ramped up.

The latest monthly update from the International Copper and Study Group shows that the supply deficit for copper stood at 10kt in September, compared to a deficit of 13kt in the previous month. Over the first nine months of the year, the copper market encountered a deficit of 295kt, compared to a deficit of 233kt during the same period last year. Global mine and refined copper production increased by 3.5% YoY and 2.3% YoY respectively, whilst overall apparent refined demand grew 2.6% YoY for January-September 2022.

Agriculture – Downside to Argentine wheat output

The latest data from a crop tour organized by the Bahia Blanca Grain Exchange shows that wheat production in the southern Buenos Aires and La Pampa provinces in Argentina is set to decline by 31% YoY following drought and frost conditions. The survey estimates for the wheat harvest (which starts next month in the region) is around 3.7mt, compared to 5.3mt last season. Meanwhile, barley production in the region is expected to drop by 20% YoY to 2.3mt.

Source: ING

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FastBull Featured

Daily News

[Quick Facts]

1. Iranian parliament approves bill for Iran's accession to SCO.

2. Exports of Ukraine's grain will not reach 3 million tonnes in November.

3. France and Germany's responses to the U.S. Inflation Reduction Act diverge.

4. Russia introduces further countermeasures.

5. U.S. business activity contracted for a fifth straight month in November.

6. The EU will open the ninth round of sanctions against Russia.

[News Details]

1. Iranian parliament approves bill for Iran's accession to SCO.

On November 27, local time, the Iranian parliament passed the bill for Iran to become a member of the Shanghai Cooperation Organization (SCO) with a high vote. The Spokesman for the Iranian parliament's National Security and Foreign Policy Committee, Abolfazl Amouei, said after the vote that the Iranian government would then need to ratify the relevant documents to pave the way for Iran to become a member of the SCO. A memorandum on Iran's obligations to join the SCO was signed at the 22nd meeting of the SCO Council of Heads of State held in Samarkand, Uzbekistan, in September this year.

2. Exports of Ukraine's grain will not reach 3 million tonnes in November.

Ukraine's grain exports in November will not reach 3 million tons due to Russia's attempts to limit ship inspections at ports, Ukrainian Infrastructure Minister Oleksandr Kubrakov said late Sunday. In October, about 4.2 million tons of grain left Ukrainian ports, Kubrakov said. It used to be customary to conduct 40 inspections a day, but now they have been reduced fivefold due to Russia's stance. He added that 77 ships are now lined up for inspection in Turkey, while the three Black Sea ports are only 50% full.

3. France and Germany's responses to the U.S. Inflation Reduction Act diverge.

Macron, who will meet with President Joe Biden in Washington at the end of this month, has pushed for a "Buy European Act" to counter the U.S.-passed Inflation Reduction Act, a law aimed at boosting domestic production of electric vehicles and reducing foreign dependence on battery components and materials. EU officials said the bill violates WTO rules, while the French finance minister accused Washington's industrial policy of discriminating against non-U.S. companies. German government officials, for their part, said Germany's position is that while Europe needs to respond with increased support for its own industry, it would be a strategic mistake to embark on a conflict with Washington at a time when Russia and Ukraine are in conflict. Officials said Germany hopes the Biden administration will agree to adjust the law to take into account at least some of Europe's concerns, and that the EU-U.S. Trade and Technology Council meeting scheduled for Dec. 5 would be an appropriate forum to examine ways to reach a compromise.

And at a meeting of EU trade ministers on Nov. 25 local time, in response to the Inflation Reduction Act, the EU asked the U.S. to heed the EU's serious concerns on the issue of electric vehicle subsidies and to stop discriminating against European companies. For its part, the EU warned that it would take countermeasures as appropriate.

4. Russia introduces further countermeasures.

According to sources familiar with the matter, the Kremlin is drafting a presidential decree prohibiting companies and traders buying Russian oil from selling it to any participant in the Russian oil price cap. The decree would prohibit trade with companies and countries that are part of the Russian oil price cap mechanism, but does not give a precise definition of "participation" in the mechanism.

5. U.S. business activity contracted for a fifth straight month in November.

U.S. business activity contracted for the fifth consecutive month in November due to weak demand, with the Standard & Poor's Global Composite Purchasing Managers' Index valuation slipping to 46.3 in November, below 50, indicating a contraction in business activity. During the month, the U.S. manufacturing purchasing managers' index fell nearly 3 points to 47.6. Excluding the first few months after the outbreak, the production and orders indexes both showed the sharpest declines since 2009. Experts worry that the U.S. economy will fall further into a possible recession.

6. The EU will open the ninth round of sanctions against Russia.

European Commission President Ursula von der Leyen said at a recent press conference during his visit to Finland that the EU is working "as fast as possible" on the ninth round of sanctions against Russia. These measures are aimed at weakening Russia's ability to take military action in Ukraine. Russian experts warn that the new EU sanctions against Russia will backfire on the West, hitting the EU itself first.

[Today's Focus]

UTC+8 16:00 Speech by ECB Governing Council member Klaas Knot

UTC+8 17:30 Speech by ECB Governing Council member Pablo Hernandez de Cos

UTC+8 22:00 Speech by ECB President Lagarde

UTC+8 01:00 Speech by New York Fed President Williams

UTC+8 01:00 Speech by St. Louis Fed President Bullard

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Alex

Commodity

Oil futures fell more than $1 early on Monday as protests in top importer China over strict COVID-19 curbs fuelled demand worries, while investors remained cautious ahead of an agreement on a Western price cap on Russian oil and an OPEC+ meeting.

Brent crude dropped $1.01, or 1.2%, to trade at $82.62 a barrel at 0110 GMT. U.S. West Texas Intermediate (WTI) crude slid $1.09, or 1.4%, to $75.19.

Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines. Brent ended the latest week down 4.6%, while WTI fell 4.7%.

"On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government's stringent COVID restrictions in Shanghai, prompted selling," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

WTI's trading range is expected to fall to $70-$75, he said, adding the market could stay volatile depending on the outcome of the OPEC+ meeting and the price cap on Russian oil.

China, the world's top oil importer, has stuck with President Xi Jinping's zero-COVID policy even as much of the world has lifted most restrictions.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's strict COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country's far west.

The wave of civil disobedience is unprecedented in mainland China since Xi assumed power a decade ago, as frustration mounts over his zero-COVID policy nearly three years into the pandemic.

Meanwhile, Group of Seven(G7) and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow's military offensive in Ukraine without disrupting global oil markets.

But a meeting of EU government representatives, scheduled for Nov. 25 evening to discuss the issue, was cancelled, EU diplomats said. The price cap is due to come into effect on Dec. 5 when an EU ban on Russian crude kicks off.

Investors are also focusing on the next meeting of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, on Dec. 4.

In October, OPEC+ agreed to reduce its output target by 2 million barrels per day through 2023.

Source: Reuters

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Owen Li

Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending, a surprisingly soft result that suggests tighter policy is working as intended.

Data from the Australian Bureau of Statistics (ABS) on Monday showed retail sales declined 0.2% in October from September to A$35.0 billion ($23.51 billion).

That was well under forecasts of a 0.5% increase, although it still left sales up 12.5% on October last year when pandemic restrictions were making shopping difficult.

"The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending," said Ben Dorber, head of retail statistics at the ABS.

Inflation is running at a 32-year high of 7.3% and set to reach 8% or higher this quarter, with food, energy and construction costs all rising.

To restrain this surge, the Reserve Bank of Australia (RBA) has lifted interest rates by 275 basis points since May to a nine-year top of 2.75%.

Markets are still wagering on another quarter-point hike to 3.10% at its December policy meeting next week, but trimmed the implied peak for rates slightly to around 3.78% from 3.85% ahead of the retail data.

RBA Governor Philip Lowe has cited consumption as a major uncertainty given the full effect of past rate rises is yet to show in mortgage payments, which could climb by around A$950 a month on a typical loan.

This was one reason the central bank hiked by only 25 basis points in November, rather than half a point.

Sales actually look stronger this month with Westpac data on card spending showing activity picking up and its tracker index running almost 38% above pre-pandemic levels.

Anecdotal evidence from retailers was that the Black Friday sales just gone were very strong and they were looking forward to an equally upbeat cyber Monday.

The sales period is shaping as a big ‘litmus test’ for the Australian consumer," said Matthew Hassan, a senior economist at Westpac.

"Activity has held up relatively well to date despite intensifying cost of living and rate rise pressures," he added. "The next few weeks will give a pointer to how well this is carrying into the sales 'high season' that runs from now through to Christmas."

($1 = 1.4888 Australian dollars)

Source: Reuters

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Thomas

Central Bank

The Bank of Thailand will raise interest rates by a modest quarter-point on Wednesday for a third straight meeting amid fragile tourism-reliant growth and signs inflation has started to ease, a Reuters poll of economists found.

The widely-expected move, which would take the benchmark rate to only 1.25%, constitutes one of the tamest central bank tightening campaigns in the world, underscoring ongoing worries about growth in Southeast Asia's second-largest economy.

Thailand's economy has lagged its regional peers and was not expected to return to pre-pandemic levels until early next year as its vital tourism sector, which makes up about 12% of output, has only just started to rebound.

With the slowest pace of inflation in six months in October, helped by government measures to ease the cost of living, BOT Governor Sethaput Suthiwartnarueput has said it is not necessary to aggressively increase rates to manage inflation like in other countries.

All but two of the 19 economists in the Reuters Nov. 21-25 poll expect the BOT to raise its benchmark one-day repurchase rate by 25 basis points to 1.25% at its Wednesday meeting. The remaining two predict rates will remain unchanged.

"We expect a relatively more modest recovery of the Thai economy and hence a less aggressive BOT compared to the rest of major and regional central banks on the back of easing inflation which may result in rather persistent weakness in the Thai baht," said Enrico Tanuwidjaja, an economist at UOB.

"Negative real interest rates will continue to favour the Thai economic recovery as it diverges away from an ultra-tight monetary policy elsewhere in the world, most notably in the U.S. and Europe."

The U.S. Federal Reserve has increased rates by 375 basis points so far in this cycle, with 75 basis point moves at the last four meetings and another 50 due in December.

Despite the wide interest rate gap, the baht has been one of the top performers in emerging market currencies, depreciating only about 7% so far this year.

"External pressure on the BOT to be more assertive with rate hikes has also eased after the recent retreat in the dollar," said Krystal Tan, economist at ANZ.

"Capital inflows have returned to its domestic bond and equity markets in the month-to-date, and the decline in foreign exchange reserves has started to reverse."

A weak currency is generally considered positive for the tourism-dependent Thailand economy.

In the year before the pandemic, 40 million tourists visited the country, which has a population of 70 million. The government wants tourism next year to reach 80% of its pre-pandemic levels, even as global growth is likely to slow.

"We expect Thai international tourism arrivals to be resilient to the global economic slowdown, with arrivals showing low sensitivity to global economic activity fluctuations historically," said Chua Han Teng, economist at DBS.

Source: Reuters

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