Bad news bears (market)

This is an audio transcript of the FT News Briefing podcast episode: Bad news bears (market)

Joanna S Kao
Good morning from the Financial Times. Today is Tuesday, June 14th, and this is your FT News Briefing.

[MUSIC PLAYING]

US stocks slide back into a bear market. The crypto meltdown is entering a new phase. The FT’s Katie Martin explains what it means for the broader ecosystem.

Katie Martin
It looks like with the price of crypto crashing, a lot of the organisations where you trade this stuff, a lot of the exchanges, simply can’t cope.

Joanna S Kao
The UK wants to tear up its 2020 Brexit trade agreement with Northern Ireland and the EU is not pleased. I’m Joanna Kao, in for Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

US stocks dropped into a bear market yesterday. By the end of trading, the benchmark S&P 500 was more than 20 per cent lower than its recent high in January. Investors were rattled by an unexpectedly high US inflation report that was released on Friday. Analysts then upgraded their forecasts of how much the Fed will raise interest rates to deal with inflation. This is the second time Wall Street has entered a bear market in the past month. In May, it just briefly hit the threshold and rebounded within the same day.

[MUSIC PLAYING]

The crypto market also had a bad day yesterday. First, Celsius, a major player in crypto that lets users lend out their tokens for high returns, blocked its customers from pulling money from its platform. It said this was due to extreme market conditions. Then Binance, the world’s biggest crypto exchange, also suspended customer withdrawals of bitcoin. The moves fuelled a broad sell-off across the digital asset market. Our markets editor, Katie Martin, joins me to discuss what’s going on. Hi, Katie.

Katie Martin
Hey, how you doing?

Joanna S Kao
I’m doing well. So, what are the underlying causes of this crypto meltdown?

Katie Martin
Yeah, it is a meltdown. And what is interesting right now is that it’s entered a new phase. So the price of crypto assets for which we can use bitcoin as our kind of benchmark, that’s been coming off hard since the back end of last year because some of the speculative froth in markets just kind of got blown away. But this year it’s really built up a head of steam. And what we saw last month was that there was a couple of coins, one token, one stablecoin, that basically hit the skids and effectively, you know, people lost a lot of money on them. So we’ve gone from thinking about, OK, which coins and tokens are in trouble here? And now what we’re seeing is, OK, which organisations that facilitate the trading here, which bits of the market infrastructure are in trouble? And that’s what we’re seeing today because it looks like with the price of crypto crashing, a lot of the organisations where you trade this stuff, a lot of the exchanges simply can’t cope. They are perfectly able to take your money in. Turns out they’re not so able to spit your money back out again if you want it.

Joanna S Kao
So now that it’s shifted to this part of the crypto meltdown, who’s being hurt and could it get worse?

Katie Martin
So who’s been burned by the latest moves is basically anybody who’s bought bitcoin in the past couple of years because we’re now below that price. So you’re underwater and with the halts in withdrawals, it’s quite possible that you can’t get your money out even if you want to. There’s a lot of people who are going to be underwater and that’s very difficult for them. There will be lots of kind of crypto billionaires out there who lose a billion or two here or there but can still live to fight another day. But there’s a lot of people who can’t afford to lose this money, who are going to lose this money. And I don’t know where this ends. And I have learned by, you know, my own trial and error, never to kind of declare the death of bitcoin because this thing has incredible staying power. Just when you think it can’t possibly pick itself up again, it picks itself up again. But this is a very, very challenging period for crypto fans.

Joanna S Kao
Katie Martin is our markets editor. Thanks, Katie.

Katie Martin
No problem.

[MUSIC PLAYING]

Joanna S Kao
UK prime minister Boris Johnson wants to rip up the 2020 Brexit agreement and make changes to the controversial rules around trade with Northern Ireland. His administration published proposed legislation yesterday. Among the changes, the bill would aim to reduce friction at ports. It would also give ministers the very controversial power to rip up other parts of the Brexit agreement. Johnson said the proposal would help ease political tension in Northern Ireland. But critics say ripping up the Brexit agreement just two years after it was signed would undermine the UK’s standing in the world. And the EU is furious. Brussels almost immediately threatened legal action after the legislation was released.

[MUSIC PLAYING]

The pandemic has caused many companies to move to a hybrid work model. This is also true for businesses in Japan. Hundreds of companies have moved over the last year from Tokyo to the countryside, but it’s not clear if this shift in workplace culture can last. Our Tokyo reporter, Eri Sugiura, recently visited one company that moved its new headquarters to Awaji island in western Japan. She joins us now to tell us more about the Pasona Group, which is one of the country’s biggest recruitment companies. Hi, Eri. How are you doing?

Eri Sugiura
Very well, thank you.

Joanna S Kao
Can you describe how life on Awaji island differs from life in Tokyo? What’s it like for the workers who’ve relocated there?

Eri Sugiura
So the life in Awaji is much more relaxed and calm. When I visited the island and talked with some employees of Pasona, they told me that they can now spend so much more time with their family and kids and spend much less time in commuting and driving just 10 or 15 minutes by the sea. So that’s very different from the time when they lived in Tokyo.

Joanna S Kao
So what was it that made Pasona decide to set up a separate base on the island?

Eri Sugiura
Actually, the CEO of Pasona, Mr Nambu, told me that he has always wanted to relocate from Tokyo because of risks of earthquakes and other natural disasters. But before the pandemic, that option seemed quite unrealistic. But after the pandemic, people started working from home, and actually workplace doesn’t matter anymore. And he also told me that the values of young people have changed from being Tokyo-centric to wanting an environment surrounded by seas and mountains. So he thought it was a good timing for him to actually make the move.

Joanna S Kao
So, there’s the risk management side of this decision. Is there an economic reason as well?

Eri Sugiura
Yes. So the government gives subsidies to companies which made relocation from Tokyo, because the government has long thought that having everything concentrated in the capital is a big risk for Japan as a whole. That’s one thing. And for CEOs, they want to save costs as much as possible. So some analysts told me that CEOs will be more selective on what functions they want to keep in Tokyo and what functions they can move away so that they can reduce the cost.

Joanna S Kao
Do you think this trend is going to continue?

Eri Sugiura
So it really depends on how much Japan can keep this new kind of working standard that has occurred after the pandemic. Before the pandemic, Japan has been recognised as one of countries where the efficiency was very low and staying late in the office was quite a habit. So once the pandemic is over, employees might come back to the office and stay in the capital again.

Joanna S Kao
They call this presenteeism, right?

Eri Sugiura
Yes, exactly.

Joanna S Kao
Eri Sugiura is the FT’s Tokyo reporter.

[MUSIC PLAYING]

You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.