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Recession fears, rising inflation spook global markets

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Will rising prices keep consumers away? Falling profits at retailers as inflation soars has worried investors
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European and Asian markets took a beating Thursday after Wall Street suffered one of its worst batterings in two years over recession fears after decades-high inflation.

Downcast earnings reports from retailers have heightened worries about consumer resilience at a time of rising interest rates, surging energy prices, China lockdowns and the Ukraine war.

“Inflation is catching up and profit margins are taking a hit. Soon enough though, those higher costs will continue to be passed on and consumers will stop dipping into savings and start being more careful with their spending,” said Craig Erlam, senior market analyst at OANDA.

“The question is whether we’re going to see a slowdown or a recession,” he said.

Leading European and Asian stock indices closed in the red. 

On Wall Street, the Dow was lower in late morning trading but both the broader S&P 500 and tech-heavy Nasdaq Composite were higher.

Shares in Chinese tech giants plunged after Tencent reported lacklustre profits, fuelling wider concerns over China’s economic outlook.

Tencent shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.

Among other tech titans, Alibaba dropped more than six percent.

On Wall Street Wednesday, all three major US indices dived, with the Dow sinking more than 1,150 points or 3.6 percent.

The Nasdaq plunged 4.7 percent by the close.

“Consumer confidence is likely to drop further as incomes are squeezed. Those big falls in shares of retailers –- Target and Walmart -– and others such as Amazon and Apple we saw on Wednesday certainly point towards this trend,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.

“Inflation is not going to be easing significantly any time soon, at a time when the economic outlook also appears grim.”

Michael Hewson, chief market analyst at CMC Markets, said the US dollar suffered as well on Thursday “driven by lower yields as concerns grow about the resilience of the US economy over the course of the rest of the year”.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell this week said the US central bank would raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. 

But higher borrowing costs increases debt, heaping further pressure on consumers and businesses.

The United States is facing the fastest inflation in four decades, as is Britain, causing the Bank of England to also raise interest rates.

– Key figures at around 1530 GMT –

New York – Dow: DOWN 0.3 percent at 31,385.97 points

EURO STOXX 50: DOWN 1.3 percent at 3,640.55 

London – FTSE 100: DOWN 1.8 percent at 7,302.74 (close)

Frankfurt – DAX: DOWN 0.9 percent at 13,882.30 (close)

Paris – CAC 40: DOWN 1.2 percent at 6,272.71 (close)

Hong Kong – Hang Seng Index: DOWN 2.5 percent at 20,120.60 (close)

Shanghai – Composite: UP 0.4 percent at 3,096.96 (close)

Tokyo – Nikkei 225: DOWN 1.9 percent at 26,402.84 (close)

Brent North Sea crude: UP 0.9 percent at $110.18 per barrel

West Texas Intermediate: UP 0.21 percent at $109.82 per barrel

Euro/dollar: UP at $1.0587 from $1.0479 at 2100 GMT Wednesday

Pound/dollar: UP at $1.2501 from $1.2346

Euro/pound: DOWN at 84.70 pence from 84.88 pence

Dollar/yen: DOWN at 127.38 yen from 128.58

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Lunch with Warren Buffett goes for a whopping $19 mn … tip included?

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A mystery bidder will pay $19 million to have lunch with iconic investor Warren Buffett, chairman and CEO of Berkshire Hathaway, seen speaking at a Washington event on October 13, 2015
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Talk about an expensive date: a mystery bidder will be spending a record $19 million for the right to have lunch with legendary American investment guru Warren Buffett. 

That whopping bid, announced by eBay, came in the 21st — and last — such charity luncheon with the aging multibillionaire, who is chairman and CEO of Berkshire Hathaway.

Bidding on the eBay website opened last Sunday at a modest $25,000. But it shot up rapidly as rival bidders tried to outdo one another, finally ending Friday at a total of just over $19 million.

The auction — held annually, though canceled by Covid-19 concerns for the past two years — raises funds for Glide, which fights poverty in San Francisco. It distributes food to the homeless and helps them find shelter, medical assistance and training.

San Francisco, a place of income extremes, has struggled for years with a large homeless population. 

This year’s still-anonymous winner of the charity auction “has not only made history, but will spend an unforgettable afternoon with American legend Warren Buffett at a private lunch with up to seven guests at Smith & Wollensky Steakhouse in New York City,” said an announcement posted by eBay.

The last pre-pandemic auction was won by Justin Sun, an American entrepreneur active in cryptocurrencies, who spent $4.6 million for the right to dine with Buffett, an outspoken critic of bitcoin.

The eBay statement quoted the 91-year-old Buffett — revered throughout the investment community as the “Oracle of Omaha” — as saying he had “met a lot of interesting people all over the world” through the auctions.

“The one universal characteristic,” he added, “is that they feel the money is going to be put to very good uses.”

Buffett’s net worth was estimated in March at $117 billion, according to Forbes.com. 

He joined Bill and Malinda Gates in forming a group of the ultra-wealthy who have vowed to give away half their fortunes. Buffett is estimated to have already donated some $48 billion.

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Bitcoin plunges below $20,000

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Bitcoin fell below $20,000, its lowest level since December 2020
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Bitcoin plunged below $20,000 on Saturday, shedding nine percent from the previous day to fall to $18,740, its lowest level since December 13, 2020.

With investors increasingly wary of risk, the world’s most popular crypto asset has lost more than 72 percent of its value since reaching a high of $68,991 on November 10, 2021.

After sinking to $18,740 on Saturday, Bitcoin rose to $18,941 at 1550 GMT, down eight percent from Friday.

Other major digital currencies were also down on Saturday, including ether, which lost nearly 10 percent of its value.

World stock markets plunged this week amid fears that inflation-fighting interest rate hikes by the US Federal Reserve and other central banks could trigger a recession.

Cryptocurrencies have paid the biggest price.

The value of the global crypto market fell below the symbolic $1 trillion mark on Monday after reaching $3 trillion in November of last year.

Bitcoin’s fall has been accelerated by the suspension of withdrawals by two cryptocurrency platforms.

The Celsius Network said it was pausing “all withdrawals, swap, and transfers between accounts” due to “extreme market conditions.”

Babel Finance said it was facing “unusual liquidity pressures.”

Major exchange Binance temporarily suspended bitcoin withdrawals and advised customers to use other networks.

Coinbase said Monday that it was trimming 18 percent of its workforce, about 1,100 jobs, citing tight economic conditions and overly rapid expansion.

“We appear to be entering a recession after a 10+ year economic boom,” Coinbase founder and CEO Brian Armstrong said.

In recent years, the crypto sector benefited from a vast infusion of cash due to easy money policies from the world’s biggest central banks.

However, rampant inflation has sparked tighter monetary policy across the globe, helping to send the industry crashing.

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Indigenous protesters in Ecuador defy state of emergency

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A demonstrator runs with a neon tube to throw at the police during Indigenous-led protests against the government in Ecuador
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Indigenous protesters demanding cheaper fuel in Ecuador defied a state of emergency Saturday, pressing on with road blockages now in their sixth day.

A day after President Guillermo Lasso announced the restrictive measures in a bid to end the sometimes violent demonstrations, police said Indigenous people kept up protests in most of the country’s 24 provinces, including three where the president declared the state of emergency. One includes the capital, Quito.

Oil producer Ecuador has been hit by rising inflation, unemployment and poverty exacerbated by the coronavirus pandemic.

Fuel prices have risen sharply since 2020, almost doubling for diesel from $1 to $1.90 per gallon (3.8 liters) and rising from $1.75 to $2.55 for petrol.

Demonstrators from the country’s Indigenous community — which makes up over a million of Ecuador’s 17.7 million inhabitants — launched an open-ended anti-government protest this week that has since been joined by students, workers and others.

The demonstrations have blocked roads across the country, including highways leading into the capital Quito.

Talks with the president failed to end the demonstrations.

Clashes with security forces during the protests have left at least 83 people injured, and 40 have been arrested.

In response, Lasso’s decree empowers him to mobilize the armed forces to maintain order, suspend civil rights and declare curfews. 

“I am committed to defending our capital and our country,” Lasso said on television. 

“I called for dialogue and the response was more violence. There is no intention to seek solutions.”

The demonstrations have largely been concentrated in the northern region of Pichincha which includes Quito, and neighboring Cotopaxi and Imbabura.

In Quito, nearly 1,000 protesters tried to tear down metal fences that surround the presidential headquarters this week.

In a bid to ease grassroots anger, Lasso announced in his address late Friday a small increase in a monthly subsidy paid to Ecuador’s poorest, as well as a program to ease the debt of those who have loans from state-run banks.

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