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Stocks stalled as oil fuels inflation nerves

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November 10, 2021

By Tom Westbrook

SYDNEY (Reuters) – Asian stockmarkets were tugged lower by fresh concern about the solvency of China’s property developers on Wednesday, while a surging oil price added to worries that a hot U.S. inflation reading could renew pressure on policymakers to lift rates.

Brent and U.S. crude futures extended gains into a fourth session, hitting two-week highs around $85 a barrel. Another warning came from Chinese factory gate prices, which are gaining at their fastest clip in a quarter century.

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S&P 500 futures fell 0.4%. FTSE futures and European futures each lost 0.2%. At 1330 GMT, U.S. inflation figures are expected to show consumer prices galloping ahead at 5.8% year-on-year, the fastest pace in a generation.

Even dovish Federal Reserve officials have conceded it is running hotter for longer than they thought.

“These inflation numbers are unlikely to make anyone feel comfortable,” said ING economist Rob Carnell. “Inflation higher for longer than expected is becoming the market’s considered opinion right now, and its likely we get reinforcement of that.”

Ahead of the data U.S. equities snapped a long winning streak with modest falls on Tuesday and on Wednesday MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%. Japan’s Nikkei fell 0.5%.

Longer-dated Treasuries have rallied in recent sessions, flattening the yield curve as investors wager on hikes in the next year or so squashing growth in the years beyond. [US/]

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Treasuries dipped a bit in Asia hours, lifting the benchmark 10-year yield about 2 basis points to 1.4626% after it had touched a six-week low of 1.4150% on Tuesday.

Currency markets have been fairly quiet but traders favoured safe havens on Tuesday and lifted the yen to a one-month high.

The Japanese currency held there on Wednesday at 112.84 per dollar and risk-sensitive currencies such as the Australian dollar were under pressure, with the Aussie falling through its 50-day moving average to $0.7366. [FRX/]

“The dollar will be sensitive to moves in the 2-5 year part of the U.S. Treasury curve,” said Chris Weston, head of research at broker Pepperstone in Melbourne.

“I think we’ll need to see a (monthly U.S. CPI) print of 0.8% to see the dollar index break out of the top of the range of 94.50,” he said. The index was last steady at 94.045.

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CLOUDS

China’s economic slowdown is also nagging on investors’ minds, especially as a credit crunch seems to be quickly spreading through the giant property industry.

Bonds in the sector have suffered a fresh drubbing and on Wednesday shares in developer Fantasia Holdings halved upon return from a six-week trading halt as the company warned it might not be able to meet its debt obligations.

A gloomy demand outlook has pushed iron ore to a 19-month low selling in banks and property stocks in Hong Kong pulled the Hang Seng down 1% to a one-month low. [.HK][IRONORE/]

“(The) market is now driven more by fear rather than rationale,” said analysts at J.P. Morgan. “Valuations have factored in (the) worst case scenario.”

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Other clouds are also gathering, with a survey in Japan showing manufacturers’ business confidence has fallen to a fresh seven-month low and Tesla stock, a bit of a gauge of retail investors’ sentiment, turning wobbly.

The carmaker, which has been the poster-stock of equities’ thumping rally from pandemic lows, suffered its sharpest share price fall in 14 months on Tuesday as traders brace for a possible sale from company chief Elon Musk.

Gold and bitcoin have been the primary beneficiaries of the market turbulence, with gold up about 3.5% in a week to $1,826 an ounce and bitcoin hovering at $66,400 after hitting a record of $68,564 a day ago.

(Reporting by Tom Westbrook; Editing by Michael Perry and Sam Holmes)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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