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- Musk Threatens War With Apple, Jeopardizing Vital Relationship
- BlockFi Bankruptcy Hijacks More Customer Cash
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- U.S. Crypto Exchange Kraken Settles With Treasury Dept.
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The latest indicator about the strength of the U.S. economy arrives this morning at 10:00 a.m. ET. The Consumer Confidence Index provides insight into consumers' assessments of the labor market, as well as business activity, financial conditions and people's willingness to spend. More importantly, it provides opinions on both the current state of affairs (Present Situation Index) and future estimates (Expectations Index), which are needed to make any type of investment decision.
Bigger picture: Consumer spending accounts for more than two-thirds of the economy, so it's important to gauge how individuals might behave in the near future. Banks, manufacturers and retailers are also keen to see changes to the index, which can inform them on whether to take on additional financing, rethink overhead, or advance/delay business investment. Among those that also keep an eye on the figures are government officials and Fed leaders, who factor in whether additional fiscal or monetary action is needed to balance the economy.
Slight month-on-month fluctuations are normal, but index changes of more than 5% - or a continuous trend in one direction - can indicate a likely path of where the economy is headed. The indicator has been steadily decreasing since notching a score above 115 last December, barring two readings in August and September that prompted hopes of an uptrend. Today's number is forecast to come in at a reduced 100.0, from October's 102.5, though any figure above 90 generally reflects a healthy economy.
How is it calculated? The Consumer Confidence Index is the result of a survey of 5,000 U.S. households that is prepared by The Conference Board, a non-profit known for its private sources of business intelligence. Survey participants across America, and each of the country's nine census regions, are asked to answer questions with responses like "positive," "negative" or "neutral." Once the data has been collected, a portion known as the "relative value" is calculated for each question (which is compared to the sum of the responses and historical data to produce a final index value).
Will China alter its zero-COVID stance in response to growing discontent? That's the hot question on traders' minds, as protests and accompanying crackdowns take place on the streets of Beijing, Shanghai and elsewhere. It will be a delicate balancing act for Xi Jinping to pivot away from the draconian policy, but in some ways he already has, like the recently announced "20 measures" that cut quarantine periods for close contacts of COVID cases and inbound travelers.
Policy watch: Today's meeting of the Chinese State Council took on extra importance, as the weekly press conference signaled that further changes to current measures might be in the making. "China has been following and is closely watching the virus as it evolves and mutates," officials said during the briefing, while health authorities released a plan to boost elderly vaccination. China also reported a decline in new COVID-19 infections with 38,645 cases after a record daily high of 40,347 on Sunday.
Markets loved any sign of easing COVID-zero following some nervousness seen in the prior session. The Shanghai Composite closed 2.3% higher, while stocks in Hong Kong rocketed 5.2% and the Hang Seng TECH Index even finished the day up 7.7%. Chinese vaccine developers were also big winners, with shares of CanSino Biologics (OTCPK:CASBF) soaring as much as 18% in Hong Kong.
Why are the protests happening now? Xi Jinping has been at the helm for nearly a decade, but over most of that period, the benefits of a booming economy were widely felt across China. Things have slowed sharply due to zero-COVID policies, and many workers are now finding it difficult to make a living amid severe restrictions and lockdowns. The current measures are also unpredictable and being seen as irrational, especially as the Chinese watch a maskless World Cup and compare it to the strict protocols of the 2022 Beijing Winter Games. (17 comments)
Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection in the U.S. in an effort to stabilize and restructure its business following the abrupt downfall of crypto exchange FTX. Major digital tokens, like Bitcoin (BTC-USD) and Ethereum (ETH-USD) were dragged lower by the news, but pared some of the losses in overnight trading. BlockFi, which is still operating its business, said it will focus on recovering all obligations by its counterparties, though recoveries from FTX are expected to be delayed given its ongoing bankruptcy process.
Contagion: BlockFi is estimated to have over 100K creditors. One of its largest creditors included FTX US's business name, West Realm Shires, with a $275M unsecured claim, while Ankura Trust Company was the lender's largest creditor by a wide margin with a $730M unsecured claim. Reports suggest that BlockFi has begun slashing costs in preparation for a restructuring, including warning two-thirds of its employees about coming layoffs.
BlockFi, which received an outsized credit line from FTX earlier in 2022, was already forced to suspend client withdrawals earlier in November due to the uncertainty surrounding the status of Sam Bankman-Fried's crypto empire. However, even before the collapse of FTX, BlockFi was struggling to keep afloat following regulatory troubles and a broader market downturn. Crypto lender rival Nexo reportedly offered to buy BlockFi for $850M in July, but BlockFi turned down that offer in favor of a bailout with FTX that never went through due to the recent liquidity crisis.
Commentary: "It is unfortunate for BlockFi that the white knight [FTX] that had offered them a lifeline back in June, hasn’t managed to stay solvent themselves, in part because of the massive losses accumulated at Alameda Research stemming from the same event - the collapse of Terra Luna and Three Arrows Capital," said Bradley Duke, founder and co-CEO at ETC Group. (79 comments)
President Biden is imploring Congress to intervene in stalled negotiations between rail unions and operators to prevent a strike ahead of a Dec. 9 deadline. The move would end a long-running labor dispute between the country's biggest freight railroads and more than 115,000 of their workers by passing a joint resolution under the Railway Labor Act of 1926. That would force employees to accept the contract approved by the Presidential Emergency Board and their unions, which was set up to mediate the dispute this past summer.
Snapshot: The five-year agreement that resulted from previous discussions offered railroad workers a 24% increase in wages from 2020 through 2024. It also granted an additional paid day off, on top of existing vacation time, but sticking points remain over work schedules and paid sick time. By some estimates, the railroads in the U.S. impact about a third to about 45% of all freight in the U.S., meaning there can be knock-on effects for many industries that could result in another inflationary threat.
"I am calling on Congress to pass legislation immediately to adopt the Tentative Agreement between railroad workers and operators - without any modifications or delay - to avert a potentially crippling national rail shutdown," President Biden said in a statement. "As a proud pro-labor President, I am reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case - where the economic impact of a shutdown would hurt millions of other working people and families - I believe Congress must use its powers to adopt this deal."
Related Tickers: Canadian Pacific Railway (CP), Canadian National Railway (CNI), CSX Corp. (CSX), Union Pacific (UNP), Berkshire Hathaway (BRK.A, BRK.B) and Norfolk Southern (NSC). (113 comments)
In Asia, Japan -0.5%. Hong Kong +5.2%. China +2.3%. India +0.3%.
In Europe, at midday, London +0.6%. Paris +0.2%. Frankfurt flat.
Futures at 6:30, Dow +0.1%. S&P +0.3%. Nasdaq +0.6%. Crude +2.5% to $79.18. Gold +1.7% to $1770. Bitcoin +1.9% to $16,501.
Ten-year Treasury Yield -5 bps to 3.65%
Today's Economic Calendar
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