Closing post: A Lehman moment?
Time to wrap up, after a busy day which started with the UK heading towards recession and ended with the collapse of a crypto empire valued at $32bn just months ago.
A quick recap
Crypto exchange FTX has filed for bankrupcy protection, amid warnings the embattled industry faces a 2008-style crisis.
On Friday, Changpeng Zhao, the founder of FTX’s rival Binance, warned the crypto market faced a 2008-style crisis with more failures to come. Speaking before FTX filed for chapter 11 protection, he told a conference in Indonesia that the global financial crisis was “probably an accurate analogy” to this week’s events, the Financial Times reported.
“The events of the past week have precipitated a Lehman Brothers moment for the entire crypto economy,” said Carol Alexander, a professor of finance at the University of Sussex.
“The contagion could last for weeks, with many other firms going bankrupt.”
The UK is on the brink of recession, after the economy shrank by 0.2% in the third quarter of 2022.
Manufacturing was worst hit, while the service sector stagnated – with the UK performing worse than other G7 nations over the quarter.
Economists said the downturn was the start of a recession that could last a year, with chancellor Jeremy Hunt predicting a ‘tough road ahead’.
Plus in other news:
Back in the UK, a Bank of England policymaker has declared that interest rates already higher than needed to bring inflation into line.
Silvana Tenreyro, a member of the BoE’s Monetary Policy Committee, told a conference in London that “policy was already in restrictive territory” before this month’s MPC meeting, where her colleagues voted to hike rates by 0.75 percentage points to 3%
Tenreyro, who argued in vain for a mere 0.25 percentage point rise, from 2.25% to 2.5%, says today it is too early to see the full effects of “the fastest tightening in policy in the MPC’s history”.
