Federal Reserve Points to Crypto Risks for Banks; Employers Ramp Up Back-to-Office Requirements

Federal Reserve Points to Crypto Risks for Banks; Employers Ramp Up Back-to-Office Requirements By James Christie

Good day. The Federal Reserve joined with other U.S. bank regulators on Tuesday in underscoring reasons for concern about financial institutions holding cryptocurrencies, reinforcing the dimming view in Washington of the assets following the collapse of trading platform FTX in November. The regulators said in a joint statement that based on their experience, issuing or holding cryptocurrencies "is highly likely to be inconsistent with safe and sound banking practices." Meanwhile, some employers in the U.S. are ordering their employees to return to the office, going as far as warning them that failing to comply could lead to termination within weeks. That shows how employees' leverage over companies may be slipping with a potential recession looming.

Now on to today's news and analysis.

Top News Federal Reserve, FDIC and OCC Warn Banks About Crypto Risks

A group of powerful bank regulators on Tuesday highlighted what they said were a litany of risks stemming from cryptocurrencies and expressed skepticism that the assets can be safely held by the financial institutions they oversee.

The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said that recent failures of major crypto firms led them to exercise caution in reviewing banks' proposals to engage with the market. They highlighted fraud and scams, market volatility, legal uncertainty, and weak risk-management and governance practices at crypto firms, among other things, as reasons for concern.

Job-Openings Report to Give Snapshot of Labor Demand

The Labor Department's November report on job openings and turnover is expected to show how demand for workers fared toward the end of 2022. The department is due to release figures at 10 a.m. Eastern time.

U.S. Economy More Bosses Order Workers Back to the Office as Job Market Shifts

Employers are losing their patience with empty desks in the office, and as the job market shifts under threat of a recession, employees' leverage over companies may be slipping, human-resources advisers say.

Reeling Office Owners Already Now Face Recession Risk in 2023

A possible recession is making the outlook for 2023 even gloomier for owners of office buildings, with new business searches for new office space, after rebounding in 2021, falling in 2022 to 44% of 2018 and 2019 levels .

Apartment Rent Growth Set to Keep Slowing This Year

The pandemic-fueled boom for multifamily building owners is fading fast, as apartment vacancies are piling up with the biggest wave of new rental buildings in nearly four decades expected to cut rent growth.

Key Developments Around the World China Rails Against Covid Restrictions on Its Citizens

China criticized what it called unacceptable and politically motivated Covid-related travel restrictions on its citizens and warned of countermeasures, an escalation in rhetoric days ahead of a planned border reopening on Sunday.

EU Set to Impose Coordinated Controls on Travelers From China

U.K. Faces New Wave of Strikes as Workers Fight for Higher Pay

British rail workers Tuesday began a five-day strike over pay, as the U.K. government faces the biggest wave of industrial action to hit the country in decades shutting down most rail services across the country.

Saudi Crown Prince Tangles With Sovereign Wealth Fund

As the Covid-19 pandemic sent global markets swooning in early 2020, Saudi Arabia's Crown Prince Mohammed bin Salman, sensing opportunity, pressed the country's sovereign-wealth fund to go on a stock-buying spree .

German Facility, Built at Breakneck Speed, Accepts U.S. Gas Shipment

Germany's newly constructed liquefied-natural-gas terminal received its first full cargo from the U.S. on Tuesday, as Berlin races to shore up its supply after the end of its decadeslong energy relationship with Russia.

Natural-Gas Prices Plunge as Unseasonably Warm Weather Is Forecast Financial Regulation Roundup Sam Bankman-Fried Pleads Not Guilty to Fraud and Other Offenses

FTX founder Sam Bankman-Fried on

Tuesday pleaded not guilty to all eight criminal counts he faces before U.S. District Judge Lewis Kaplan in federal court in Manhattan, and his trial was set to begin on Oct. 2 .

IRS Sees Crypto Companies as Potential Crime-Fighting Partners

The IRS Criminal Investigation division is bringing on hundreds of new agents a year, including many to work on digital assets and cybercrime, according to the special agent in charge of IRS-CI's New York field office.

Forward Guidance Wednesday (all times ET)

10 a.m.: U.S. Job Openings and Labor Turnover Survey for November; ISM report on business manufacturing PMI for December

2 p.m.: U.S. Federal Reserve releases Dec. 13-14 meeting minutes

Thursday

4:30 a.m.: S&P Global / CIPS UK Services PMI for December

5 a.m.: EU producer price index for November

8:15 a.m.: ADP National Employment Report for December

8:30 a.m.: Canada trade report for November; U.S. international trade in goods and services for November; U.S. weekly jobless claims

9:20 a.m.: Atlanta Fed's Bostic speaks at Fed conference on financial markets and institutions in New Orleans

9:45 a.m.: U.S. services PMI for December

11 a.m.: Global services PMI for December

1:20 p.m.: St. Louis Fed's Bullard speaks to CFA Society St. Louis and St. Louis Rotary Club

Research Decline in Germany Inflation Unlikely to Please ECB

The fall in German inflation adds to evidence that price growth has passed its peak, but the decline is unlikely to provide much relief for European Central Bank officials as it is driven partially by government support, Pantheon Macroeconomics chief eurozone economist Claus Vistesen writes in a note. The data also point to a further acceleration in core inflation-which strips out the more-volatile categories of food and energy-and this will embolden the ECB to continue to increase interest rates, he writes. "This is because many policymakers on the governing council will see headline-inflation-reducing fiscal measures as net demand stimulus, risking even stronger core inflation for longer," Mr. Vistesen writes.

-Xavier Fontdegloria

Basis Points The U.S. manufacturing sector contracted in December at the steepest pace since the onset of the Covid-19 pandemic as demand remained subdued and production weakened, according to data from the S&P Global U.S. manufacturing PMI survey. Its index decreased from 47.7 in November to 46.2,the lowest reading since the initial Covid-19 lockdown period in May 2020 and unchanged from the preliminary reading. The index suggests factory activity shrank for a second consecutive month as readings below 50.0 indicate contraction. (Dow Jones Newswires) Outlays in the U.S. for construction projects rose 0.2% in November to $1.81 trillion, the Commerce Department reported Tuesday. Spending in October fell a revised 0.2% to $1.8 trillion, compared with a prior estimate of a 0.3% drop. (DJN) Germany's annual inflation rate fell more than expected in December as fuel prices dropped and the government implemented a one-off subsidy for consumers' utility bills. The consumer price index rose 8.6% on year measured by national standards, down from 10% in November, preliminary data from the German statistics office showed, marking the second consecutive fall in inflation. It currently stands at its lowest level since August. Economists polled by The Wall Street Journal expected inflation to decrease to 8.8%. (DJN) France's annual inflation rate fell in December to its lowest level in three months, driven by a moderation in energy prices. Consumer prices rose 5.9% on year in December in the eurozone second-largest economy, easing from the 6.2% increase registered in November and the lowest rate since September, preliminary data from the country's statistics office Insee showed Wednesday. (DJN) U.K. grocery-price inflation in December has led to the first ever breach of the 12 billion pound ($14.36 billion) grocery sales mark for Christmas, though sales volumes slipped, according to the latest report by market-research firm Kantar. (DJN) U.K. shop-price inflation in early December plateaued as lower non-food inflation offset higher food prices, the latest shop-price index report by Nielsen IQ and the British Retail Consortium showed. Prices at U.K. stores for Dec. 1-7 were 7.3% higher than the same period a year earlier. This compares with the record-high increase of 7.4% in November and a three-month average rate of 7.1%, according to the report. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

01-04-23 0715ET