Aurelia Butler

(Reuters) -Banks should be more careful about the risks of fraud, legal uncertainty and misleading disclosures by crypto firms, U.S. regulators warned on Tuesday, just two months after the collapse of crypto exchange FTX stunned the financial world. In their first joint statement on crypto, the Federal Reserve, Federal Deposit Insurance Corp (FDIC) and the Office of the Comptroller of the Currency (OCC) said they had concerns with the safety and soundness of bank business models that are highly concentrated in crypto. Banks issuing or holding crypto tokens stored on public, decentralized networks are “highly likely” to be inconsistent with safe and sound banking practices, the regulators added, potentially dealing a blow to several lenders’ ongoing efforts to provide crypto services to customers. The statement comes after months of hesitancy from regulators to issue uniform guidance or rules on cryptocurrency, even as banks have expressed a desire for more clarity. The OCC has previously said banks must obtain regulatory approval before engaging in certain crypto-related activities, such as holding tokens on behalf of clients, while the Fed has instructed banks to notify their supervisors before moving forward with any efforts involving crypto. The regulators said they are supervising banks that may be exposed to crypto-related risks and are carefully reviewing bank proposals to engage in crypto activities, according to the joint statement. “It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the regulators said. The pronouncement comes as digital asset companies reckon with high-profile collapses, most notably that of crypto exchange FTX. Founder Sam Bankman-Fried pled not guilty to eight criminal charges, including wire fraud and conspiracy to commit money laundering, in a Manhattan federal court on Tuesday. The Fed, FDIC and OCC emphasized numerous risks associated with crypto, including the volatility of digital asset markets, contagion risk within the sector and weak risk management. The regulators said they would issue further statements on banks’ crypto-related activities as warranted and would continue to work with other agencies on crypto issues. More

(Reuters) -Blackstone Inc on Tuesday said it had secured a $4 billion investment from the University of California in its unlisted real estate income trust (BREIT) that has been plagued by investor redemptions, after the private equity firm committed $1 billion to backstop the university’s returns in the fund. In an unprecedented move, Blackstone (NYSE:BX) exercised its right in November to limit redemptions in the $69 billion BREIT after it received investor requests for redemptions exceeding 5% of the fund’s net asset value. It blamed investors in Asia facing a cash crunch because of the market turmoil for the move. While the BREIT’s returns have remained robust — it gained 8.4% net of fees in 2022 versus a 26% decline to the publicly traded Dow Jones U.S. Select REIT Total Return Index — Blackstone has been seeking to convince investors that such outperformance will continue given a rise in interest rates that is weighing on large swathes of the real estate sector.UC Investments, the University of California’s investment arm, agreed to hold its investment in BREIT for at least six years. In exchange, Blackstone will offer $1 billion of its own investment in BREIT as collateral, allowing for that money to go to UC Investments to make up for any shortfall if the university does not achieve a minimum 11.25% annualized net return through January 2028. The agreement represents a show of confidence in BREIT at a time when more capital in the fund wants out. Blackstone disclosed on Tuesday that redemption demand from investors in the REIT totaled about $3.8 billion in December, up from about $3 billion in November when it raised the gates. Blackstone decided to allow investors to redeem $151 million in December, meeting just 4% of the demand to cash out.Blackstone said it will receive 5% of all profit generated above the 11.25% threshold return guaranteed to UC Investments.UC Investments will also pay to Blackstone the normal fees charged to all BREIT investors: 12.5% of profits and 1.25% of total investment as management fees.Blackstone’s shares were up 1.42% in afternoon trading on Tuesday. The stock has lost 43% of its value over the past 12 months.BREIT, which is marketed to high net-worth investors rather than institutional clients like pension funds and insurance firms, has become a key part of Blackstone’ asset management franchise, contributing more than 17% to the firm’s earnings.UC Investments has about $152 billion in assets under management. More

“Good news to start 2023. The negotiation between China and Ecuador has been successfully concluded,” Lasso tweeted.With the deal, Ecuadorean exports will have preferential access to China, and the South American country’s manufacturers will be able to acquire machinery and inputs at lower costs, Lasso added.”This trade agreement will allow preferential access for 99% of Ecuador’s current exports to China, especially agricultural and agro-industrial products such as shrimp, bananas, roses and flowers, cocoa, coffee,” Ecuador’s production ministry said in a statement.Ecuador began its negotiations with Beijing in February 2022.Lasso has previously said the deal would secure an additional $1 billion in Ecuadorean exports to China. He did not offer updated figures on Tuesday.Between January and October 2022, Ecuadorean non-oil exports to China totaled $4.9 billion, a figure higher than any other nation with which Ecuador does export business.Last year Ecuador reached an agreement to restructure its debt with Chinese banks, providing relief worth some $1.4 billion until 2025. More

While the last two monthly reports showed a deceleration in consumer-price increases, “I don’t think it will warrant a Fed reversal that is substantial enough to avoid at least a mild recession,” Greenspan — now a senior economic adviser to Advisors Capital Management — said in a question-and-answer commentary on ACM’s website distributed Tuesday. The Fed raised interest rates aggressively last year in a bid to pull inflation down from a 40-year high, and says it will keep tightening policy until the job is done. Wage increases, and by extension employment, still need to soften further for the pullback in inflation to be anything more than transitory, Greenspan said. “We may have a brief period of calm on the inflation front but I think it will be too little too late,” he said.  The risk of lowering rates too quickly is that inflation “could flare up again and we would be back at square one,” Greenspan said. That could damage the Fed’s credibility as the guarantor of stable prices, he said. “For that reason alone, I do not expect the Federal Reserve to loosen prematurely unless they deem it absolutely necessary, for example, to prevent financial market malfunctioning,” he said. ©2023 Bloomberg L.P. More

Tesla shares tumbled on the first day of trading in 2023 after the group’s new vehicle deliveries fell short of Wall Street expectations, while the US tech rout also pushed Apple’s market capitalisation $1tn below its peak.Fears that the electric carmaker faces a slowdown in demand sent Tesla shares down 12.2 per cent on Tuesday. Apple’s market value fell below $2tn — a stark reversal from the first trading day of 2022, when it became the only company to reach a $3tn valuation.The tech sector has been hit by investors’ concerns about looming recession, persistently high inflation and rising interest rates, as well as severe disruption to supply chains because of Covid in China.Recent months have been chaotic for Apple, which in November said it was experiencing “significant” disruptions in the assembly of high-end iPhones, following an outbreak of Covid-19 at a megafactory in Zhengzhou, which is run by Foxconn, its biggest assembler.Tom Forte, an analyst at DA Davidson & Co, said the Covid outbreak in China was “the biggest wild card” for Apple’s results in 2023.Manufacturing problems in China and the uncertain economic outlook in the US have also raised concerns about Tesla’s prospects.Like Apple, the carmaker struggled with production and logistics challenges in 2022, including the closure of its largest production plant in Shanghai early in the year.Chief executive Elon Musk warned last month of “stormy weather ahead” as higher interest rates weighed on demand. Tesla said on Monday that it delivered 405,278 vehicles in the three months to the end of December, an 11 per cent increase from the record it hit in the preceding quarter. Most analysts had expected deliveries to reach between 420,000 and 430,000.Daniel Ives, an analyst at Wedbush, said the “Cinderella ride” was over for Tesla, adding that Musk needed to steer the company through a “dark macro storm” instead of focusing on Twitter, his new purchase, “which remains a distraction”.

The disappointment over the fourth-quarter shortfall came despite Tesla’s new plants in Berlin and Texas continuing to increase production.Apple was the first publicly listed company to reach $1tn in market value in August 2018 and it attained $3tn last year. There are now no tech companies worth more than $2tn, but Apple is the largest, followed by Microsoft at $1.8tn.The iPhone maker’s business performed strongly during the coronavirus pandemic and in the 12 months to September it posted a record $394bn of revenue and nearly $100bn in net profit.According to Counterpoint Research, the company shipped just 14 per cent of all smartphones globally in the first nine months of the year, but it accounted for 43 per cent of all revenues and 82 per cent of all profits — its highest profit share since 2015.However, recent months have been chaotic for the tech giant and the threat to its production has grown after Beijing loosened its strict Covid restrictions and cases in the country began soaring. More

Chinese policymakers have pledged to strengthen policy adjustments to cushion the impact on businesses and consumers of a surge in COVID-19 infections after Beijing’s abrupt COVID-19 policy U-turn. The world’s second-largest economy also faces declining exports due to slow global growth and a protracted property slump at home, which also reduced local governments’ revenue from land sales.Liu said in an interview with Xinhua that the government needed to expand fiscal expenditure, use local government special bonds to drive investment and increase transfer payments from the central government to poor and less developed areas.The government needs to “ensure fiscal sustainability and keep local government debt risks controllable,” the finance minister said. Policymakers in 2022 drew on an established practice of issuing debt to fund big public works projects to try to revive the slowing economy.Since 2018, China has arranged 14.6 trillion yuan ($2.11 trillion) in new local government special bonds to support the economy, Liu said. That included 4 trillion yuan in such bonds to support the construction of nearly 30,000 projects in January-November of 2022. In 2023, the fiscal shortfall outstanding will not lead China to hold back expenditure on people’s livelihood, Liu vowed. “We will keep fiscal spending appropriately,” he said, adding the government will increase funds to support education and ensure money needed for fighting against COVID.The finance chief also said China will standardise the management of local government financing vehicles (LGFVs) to guard against local debt risks. LGFVs are typically investment companies that raise money and build infrastructure projects on behalf of local governments.China’s outstanding government debt is below 60% of its GDP so far – lower than the global general debt-to-GDP ratio, Liu said.($1 = 6.9035 Chinese yuan renminbi) More

German inflation slowed more than expected in December, sliding into single digits for the first time since the summer and providing some relief for the European Central Bank in its battle to control price rises.Consumer price inflation dropped to 9.6 per cent in the year to December, well down on the 11.3 per cent registered the previous month, after Berlin implemented measures to shield consumers from high gas prices. The figure, published by the country’s federal statistical agency on Tuesday, was also lower than the 10.7 per cent forecast by economists polled by Reuters.

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The eurozone’s largest economy is the latest country to experience a sharper than expected drop in price pressures. The German number — down from a seven-decade peak of 11.6 per cent in October — follows a sharp fall in inflation in Spain and may ease pressure on the ECB, which will next meet to set rates on February 2. Together, the German and Spanish figures suggest eurozone inflation could drop lower than the 9.7 per cent forecast by economists when data are published on Friday. Robin Brooks, chief economist at the Institute of International Finance, a trade body for global finance, said the fall meant that “the peak of ECB hawkishness is behind us”. The euro traded 0.9 per cent lower against the dollar on the day, at $1.056.“Headline inflation in Germany seems to have reached its peak and, unless there is another large surge in energy prices, double-digit inflation numbers should be behind us for a long while,” said Carsten Brzeski, economist at ING Bank. However, others cautioned that the nature of the slowdown — in large part driven by the government’s gas price brake — meant the ECB remained likely to raise rates by 50 basis points in February. Energy inflation, which soared after Russia’s invasion of Ukraine, slowed to 24.4 per cent in December from 38.7 per cent in the previous month and well below a peak of 43.9 per cent in September, reflecting the government subsidies. Meanwhile, services inflation — a better measure of underlying price pressures — accelerated to 3.9 per cent from 3.6 per cent in November. Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the services inflation figure was “unpleasant” and would embolden rate-setters to continue on the hawkish path set out in the December meeting. Vistesen warned that, by boosting demand, the government subsidies risked stoking underlying inflation.

Germany’s 9.6 per cent figure for December inflation reflected so-called harmonised prices, a pan-European measure. Separately, the German consumer price index reading came in lower at 8.6 per cent, down from 10 per cent in November.Franziska Palmas, senior Europe economist at Capital Economics, said she expected German inflation to rise in January, when gas and heating subsidies end. “Headline inflation is still likely to decline rapidly in March, but we think the core rate, which probably rose in December, will end the year well above 2 per cent,” she added.Separate data from the Federal Labour Office, also out on Tuesday, showed German unemployment fell by 13,000 in December, taking the jobless rate to 5.5 per cent. Oliver Rakau, chief German economist at Oxford Economics, said the robustness of the country’s labour market would also “likely bolster the ECB’s view that the [eurozone] recession is set to be shallow and that underlying price pressures remain too strong to stop tightening for now”.Additional reporting by George Steer More