A wonderful Friday to you as global stocks pare weekly loss on China tech rally.

In brief (TL:DR)

U.S. stocks were lower on Thursday with the Dow Jones Industrial Average (-0.46), the S&P 500 (-1.06%) and the Nasdaq Composite (-1.73%) all in the red.

• Asian stocks headed for the biggest weekly jump since July.

• Benchmark U.S. 10-year Treasury yields was little changed at 4.14% (yields rise when bond prices fall). 

• The dollar weakened against all major currencies.

• Oil rose with December 2022 contracts for WTI Crude Oil (Nymex) (+2.48%) at US$90.36 as investors weighed a tightening outlook for energy supply against persistent concerns over a global economic slowdown. 

• Gold climbed with December 2022 contracts for Gold (Comex) (+1.24%) at US$1,651.20.

• Bitcoin (+1.60) rose to US$20,606.

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

Global stocks trimmed a weekly loss as Chinese tech shares rebounded more than 10%, helping offset some of the drag on markets caused by Federal Reserve interest-rate hikes.

The gains in Chinese stocks came as investors continued to speculate on the possibility of Beijing rolling back its Covid-Zero policy. News that US audit officials were ahead of schedule in on-site inspections of Chinese companies also supported sentiment. 

Swaps that reference future Fed meetings indicate an expected peak rate above 5.15% around mid-2023. 

Asian markets were higher on Friday with Tokyo's Nikkei 225 (-1.68%) down, while Sydney’s ASX 200 (+0.50%), Hong Kong's Hang Seng Index (+5.36%) and Seoul's Kospi Index (+0.83%) all up.

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

• Tiger Global Management, a long-time China bull, has pulled back from the region and is pausing future stock investments with the percentage of their portfolio in the world’s second largest economy shrinking from the mid-teens to mid-single digits. 

• For now, Tiger Global is taking a wait-and-see approach for its Chinese investments until Xi’s next public statements, which may be awhile coming and focusing on India and Southeast Asia instead. 

One of the remaining bulls of the Chinese market Tiger Global has finally conceded that even they can no longer tame the dragon, throwing in the towel on a market that was supposed to deliver only growth and returns. 

After President Xi Jinping last month clinched a precedent-defying third term in office, investors have been increasingly concerned that geopolitical tensions and China’s zero-Covid policy, with lockdowns and quarantines, are even more likely to persist. 

Tiger Global Management, a long-time China bull, has pulled back from the region and is pausing future stock investments with the percentage of their portfolio in the world’s second largest economy shrinking from the mid-teens to mid-single digits. 

Although Tiger Global gained renown for its early prescient bets on China, the firm’s hedge and long-only funds have been reducing their exposure to the country this year and continued to do so last month as the market has become a minefield for investors. 

Last year, Chinese regulators cracked down on the tech sector, imposing new restrictions and taking some executives into custody, sending once-high-flying stocks tumbling. 

Lockdowns have complicated company operations and heightened tensions with the U.S. appear to be a durable feature given the increasingly assertive rhetoric emanating from Beijing. 

For now, Tiger Global is taking a wait-and-see approach for its Chinese investments until Xi’s next public statements, which may be awhile coming and focusing on India and Southeast Asia instead. 

Tiger Global’s remaining China exposure is tied mostly to food delivery titan Meituan and online retailer JD.com, though even those positions have shrunk against the backdrop of tighter restrictions on technology and other once lucrative sectors.

2. Even the Richest Tech Companies are Dialing Back Expenses  

• Some of the world’s biggest tech companies are once again tapping the brakes on hiring as they contend with sluggish consumer spending, higher interest rates and the impact of a strong dollar overseas. 

• The latest round of job losses are the latest sign of how darkening economic conditions are forcing tech companies to cut costs and build buffers to cope with a slowdown in consumer spending and with it ad revenues.

Some of the world’s biggest tech companies are once again tapping the brakes on hiring as they contend with sluggish consumer spending, higher interest rates and the impact of a strong dollar overseas. 

Amazon.com said Thursday that it would pause new hires in its corporate workforce, as businesses overall tighten their belts to cope with an economic slowdown. 

Payments company Stripe and ride-hailing service Lyft became the latest technology companies to lay off staff on Thursday. 

Stripe, one of the world’s most valuable startups, is cutting 14% of its workforce, translating to about 1,000 people. 

Meanwhile, Lyft, the ride-hailing company, will eliminate 13% of staff, or around 683 people. 

Twitter’s cutbacks are under particular scrutiny as new owner Elon Musk shakes up the social-networking business and pares roughly half its jobs.

The latest round of job losses are the latest sign of how darkening economic conditions are forcing tech companies to cut costs and build buffers to cope with a slowdown in consumer spending and with it ad revenues.

Even Apple, which has outperformed most of its peers this year, is slowing spending. 

But some tech giants are finding that they now need to take more dramatic steps to trim their expenses. 

Weaker-than-expected third quarter earnings has also spooked investors as interest rate hikes hit the tech sector, particularly companies that don’t turn a profit, particularly hard.

3. Sagging Trading Volumes Hammer Revenues at Coinbase 

• Coinbase reported net revenue of US$576mn in the third quarter, down from over US$1.2 billion a year before, and US$803 million the previous quarter. 

• The lack of price action has placed renewed pressure on Coinbase, which described cryptocurrency price volatility as a “key driver of our retail trading volume” in a letter to shareholders. 

The washout in Bitcoin and other digital assets has reversed the fortunes of the U.S.-listed cryptocurrency exchange Coinbase as it suffered sharp declines in revenues and trading volumes in the third quarter.

Coinbase reported net revenue of US$576mn in the third quarter, down from over US$1.2 billion a year before, and US$803 million the previous quarter. 

The U.S. cryptocurrency exchange lost US$545 million in the latest quarter, a sharp reversal from the US$406 million profit a year earlier against a backdrop of interest rate hikes, policy tightening and rising inflation. 

While Bitcoin and Ether have both lost about 70% of their value since their all-time high last year, trading volumes and monthly transacting users at Coinbase have dropped by around 27% and 6%, respectively, from the second to the third quarter.

According to data provider CryptoCompare, average annualised volatility for Bitcoin has hit its lowest point since October 2020. 

The lack of price action has placed renewed pressure on Coinbase, which described cryptocurrency price volatility as a “key driver of our retail trading volume” in a letter to shareholders. 

In June, Coinbase announced it would cut nearly a fifth of its workforce, which amounts to over 1,000 employees and the exchange also rescinded job offers as part of the sharp pullback and worsening market conditions.

But it’s not all doom and gloom as the crypto industry weathers what could be a prolonged winter as Coinbase inked a deal with asset management giant BlackRock in August to give the latter’s clients more seamless access to digital asset markets. 

Despite lower crypto prices, growing institutional interest in the digital asset class could provide a light at the end of the tunnel for Coinbase and the BlackRock deal could possibly help to make up for flagging retail flows.