I'm having a similar issue, and I'm also not able to access the marketplace. I have taken all the troubleshooting measures I can think of to ensure my console is working properly and connected to working internet, so I'm stumped as to what the problem could be.
I ran into this is well. Minecraft soon crashed afterward. I've been having issues with this hotfix all morning.
As in the entire screen is red? Can you reproduce and get a screenshot?
Having the same issue on PS5. Error code creeper when trying to log in to my Microsoft account. My Internet is fast and stable, all other multiplayer and streaming services working on my PS5, but still unable to connect to Microsoft. Re-installed the game, cleared console cache, restarted console.