A terrific Monday to you as investors await commentary from Fed officials this week and protests in China over Covid lockdowns damp sentiment.

In brief (TL:DR)

• U.S. stocks were little changed on Friday with the Dow Jones Industrial Average (+0.45) up, while the S&P 500 (-0.03%) and the Nasdaq Composite (-0.52%) down slightly.

• Asian stocks slid as growing unrest in China over Covid restrictions sent a shiver through global markets.

• Benchmark U.S. 10-year Treasury yields declined three basis points to 3.65% (yields fall when bond prices rise). 

• The dollar steadied after strengthening in the risk-off mood.

• Oil slumped with January 2023 contracts for WTI Crude Oil (Nymex) (-3.02%) at US$73.98 as the developments in China punished risk assets and clouded the outlook for energy demand, adding to stresses in an already-fragile global crude market.

• Gold steadied with February 2023 contracts for Gold (Comex) (+0.48%) at US$1,777.30 after earlier declines that accompanied the strengthening dollar.

• Bitcoin (-1.81) fell to US$16,242, trading in a tight range as traders are uncertain about the next directional move.

In today's issue...

1. Tiger Funds Cowed by the Unpredictability of the Chinese Dragon 

2. Even the Richest Tech Companies are Dialing Back Expenses  

3. Sagging Trading Volumes Hammer Revenues at Coinbase 

Market Overview

The unrest in China complicates expectations of the country’s path to reopening, which -- along with prospects of more moderate Federal Reserve interest-rate increases -- had buoyed sentiment toward riskier assets in recent sessions. 

Traders also assessed the chances that China may exit its Covid Zero policy earlier than previously thought.

All eyes will be on the US jobs report this week and on Fed Chair Jerome Powell and New York Fed President John Williams, who are among central bank officials scheduled to speak. 

Asian markets were lower on Monday with Tokyo's Nikkei 225 (-0.43%), Sydney’s ASX 200 (-0.42%), Hong Kong's Hang Seng Index (-1.57%) and Seoul's Kospi Index (-1.21%) all down.

1. Global Inflation is Likely to Have Peaked 

• Key data indicators suggest that this year’s rampant global inflation has peaked.

• However, while it is likely to fall from its peak, global inflation is set to remain above central banks’ long-term targets.

Factory gate prices, shipping rates, commodity prices and inflation expectations have all begun to subside from their recent record levels. 

Key data indicators suggest that this year’s rampant global inflation has peaked and that the pace of headline price growth which hit household finances and business activity in recent months is set to slow in the coming months. 

According to Moody’s estimates, global inflation hit a record 12.1% in October that will be the high water mark for consumer prices. 

The signs of easing price pressures would be welcome news for leading central banks, which have been raising interest rates rapidly in a co-ordinated effort to tame inflation, risking plunging major economies into recession by doing so.

While inflation has already peaked across emerging markets, recent data shows a weakening of some price pressures in developed economies. 

In Germany, factory gate prices fell 4.2 per cent in October compared with the previous month - the largest monthly fall since 1948. In the US and the UK, annual producer price inflation has been slowing since the summer. 

Nearly all the G20 group of leading economies that have released their October producer price indices reported a slower pace of annual growth than in the previous month, including Spain, Mexico, Portugal and Poland.

However, while it is likely to fall from its peak, global inflation is set to remain above central banks’ long-term targets.

Some economists cautioned that continued high energy costs could slow the decline. Prices for energy and other commodities could jump again if the Chinese economy makes a strong recovery, or if Russia makes further export cuts in retaliation for western price caps on its oil and gas.

2. Commodities Sink as Covid’s Spread, Protests Worsen Outlook

• Commodities sank as China’s Covid outbreak worsened and a series of stunning street protests in the country.

• The outlook for commodities hinges largely on how China’s Covid Zero policies evolve from here. 

Commodities sank as China’s Covid outbreak worsened and a series of stunning street protests in cities across the nation threaten to derail economic activity and sap demand for energy, food and raw materials. 

Base metals in London and Shanghai dropped, with Chinese copper futures declining as much 1.8%. Iron ore in Dalian fell as much as 2%, before paring losses. Crude oil in Shanghai followed international markets lower, plunging as much as 5.6%. 

According to a note from Shanghai Metals Market, fears over China’s worsening virus situation and the government’s curbs have overshadowed the impact of Beijing’s latest stimulus measures, a cut in the cash buffers that banks are required to hold, enacted Friday. 

Besides, sales at manufacturers are falling just as tighter Covid controls hit the real economy and copper consumption.

While China is the largest importer of everything from oil to iron ore and soybeans, and purchases have already slowed this year as the economy has stumbled, a return to stricter lockdowns would further squeeze demand for a number of key commodities.

In the meantime, the uncertainty has sent investors scurrying for the haven of the US dollar, which puts pressure on international commodities priced in the currency such as crude.

The outlook for commodities hinges largely on how China’s Covid Zero policies evolve from here. A broad easing of the rules may not emerge in 2023, according to Bloomberg Intelligence.

3. FTX Tensions Intensify as Bahamas Blasts Company’s New Chief

• The Bahamian government blasted the person in charge of restructuring crypto exchange FTX, the latest salvo in an escalating fight over what remains of Sam Bankman-Fried’s crumbled empire. 

• Attorney general calls remarks in bankruptcy ‘regrettable’.

FTX’s downfall has rippled across the crypto markets and cast a spotlight on the Bahamas and its burgeoning crypto industry. 

Tensions have been rising after more than 100 FTX companies filed for bankruptcy in the US on Nov. 11. 

The Bahamian government blasted the person in charge of restructuring crypto exchange FTX, the latest salvo in an escalating fight over what remains of Sam Bankman-Fried’s crumbled empire. 

Bahamas Attorney General Ryan Pinder on Sunday said that recent statements made in US bankruptcy proceedings by John J. Ray III were “regrettable” and misrepresented actions taken by the nation’s securities watchdog. 

While lawyers for the crypto exchange have accused Bankman-Fried of undermining reorganization efforts with “incessant and disruptive tweeting.”, they have also raised the suggestion that some FTX assets were ordered to be transferred to the Bahamian government after the bankruptcy filing.

“We do not apologize for our ambition for Bahamians to be at the forefront of this exciting innovative sector,” Pinder said. “The Bahamas stands behind its decision to regulate digital assets and related businesses. We stand behind the quality of the regulations that exist.”