Posts Tagged ‘real estate’
Mortgage Market Update 8-24
Prior to 8:30 the DJIA futures was down over 100 points
after the strong 322 point rally yesterday.
At 8:30 July durable goods orders, expected up 1.9%,
was reported up 4.0%; excluding the volatile transportation orders durables was
expected down 0.4%, as reported up 0.7%. A very good report that turned the
trade in stock indexes around to trade unchanged at 9:00. Bookings for goods
meant to last at least three years rose the most in four months, after falling
a revised 1.3% in June. The bond and mortgage markets were a little stronger
prior to durables, and then fell back some but still not much change from
yesterday’s levels.
All markets continue to increase focus on Bernanke’s opening
speech Friday at Jackson Hole.
Risk trades coming off in equities and the bond market as well as currency trading. Gold fell $62 yesterday this
morning down again another $42 at 9:00. Will we get another money printing QE? Or
has the Fed recognized it has run out of bullets in terms of increasing
economic growth? Keeping interest rates low is already a given from the Fed
after the statement from the FOMC two weeks ago; so far the historic low long
term interest rates, including mortgage rates, has had no real impact on the
economy. With many believing another easing will occur, maybe Bernanke feels
cornered and has to do something. What he should do is chastise politicians and
the Administration for failing to accept that spending cuts are now mandatory
as well as increased revenues. Not going to happen.
Earlier this morning the weekly MBA mortgage applications were
weaker again.
The purchase index fell steeply for a second week, down 5.7% in the August 19
week and now at its lowest level in 15 years. Low interest rates aren’t helping
with applications falling across the board including a 15% fall for jumbo loans
and an eight percent fall for government housing programs. Low rates had
triggered a surge in refinancing applications which however eased back 1.7% in
the latest week. Rates moved slightly higher in the week with the 30-year up
seven basis points to 4.39%.
At 9:30 the DJIA opened -50, the 10 yr note -3/32 at 2.17%
and mortgage prices up 1/32 (.03 bp) form yesterday’s close.
After the lower open, by 9:45 the DJIA began to improve and interest rate markets backed off
to trade lower in price, the 10 yr note yield at 9:45 at 2.19% +3 bp while
mortgages were down 5/32 (.15 bp). Lenders that priced prior to 9:30 are
watching closely, anymore weakness will set up re-pricing.
Like yesterday, we are not looking for much in the way of
movement, but the very near term bias is slightly negative for the
bond and mortgage markets as long as equity markets don’t crack.
Short covering and positioning ahead of Bernanke on Friday is providing a little support in
equities on the idea another easing from the Fed would drive investors back
into stocks. Frankly, I don’t understand that logic; QE 2 didn’t help, another
easing that will push interest rates lower—so low that investors have little
choice but to buy stocks—-seems like a huge stretch. Low interest rates and
some improvement in stock prices have had no positive impact on the economy.
At 1:00 this afternoon Treasury will auction $35B of 5 yr
notes, yesterday’s 2 yr auction met with good demand, most expect the 5 yr
today will also be well bid.
At 10:00, the June FHFA housing price index, not much of a market
mover, fell 4.3% yr/yr; from May to June +0.9%. No reaction to it as it isn’t
new news.
The Troll
Daily Pfenning 8-23
In This Issue
* Gold sees profit taking as it nears $2,000.
* Currencies take their turn with the dollar.
* Eurozone & China PMI’s beat forecasts.
* Canadian Retail Sales to disappoint.
The trading was all about Gold (and Silver) yesterday again, but it looks like they are finally seeing some profit taking this morning, while the currencies move higher. Hmmm. I had better see what’s up, doc!
Front and Center this morning, Gold and Silver are seeing some profit taking, after Gold climbed as high as $1,897!!! ($1,910 in futures!) I told the boys and girls on the desk yesterday that I truly believed that once Gold moved past $1,900, that it wouldn’t take long for it to get to $2,000, because of all the momentum behind it, and the idea that so many analysts have called for $2,000 Gold of course, I don’t know anything “inside” that would make me think that. It’s simply my opinion, and I could be wrong!
So with Gold & Silver backing off their lofty levels of yesterday afternoon, the currencies have decided to take over. It’s like a tag-team wrestling match, folks. Gold beat on the dollar, until it was tired, tagged the currencies, and now it’s their turn to beat on the dollar. So, as I look at the currency screens this morning, I see that all the currencies that are supposed to show “green numbers” are green, and all the currencies that are supposed to show “red numbers” are red, which means it’s an all out rout on the dollar. You can see that even the currencies of Japan and Switzerland, which rallied alongside the dollar when it was “risk aversion” and flight to safety time, have turned on the dollar, and are rallying beside the other currencies this morning!
The beaten and beleaguered euro is up $1.25 this morning. So, in my conspiracy world, I would think that it’s about time that the U.S. media begins to dig up more dirt on the Eurozone, so as to take the focus away from the U.S.’s problems, that are probably deeper than most realize, and I do believe that this Friday’s speech by Fed Chairman, Big Ben Bernanke, will highlight the need for more stimulus. And that thought is shared by the bond guys, who are selling Treasuries ahead of the speech, because they don’t want to be caught with Treasuries when everyone is heading for the exit door at the same time!
Now, don’t get me wrong. Things are seriously wrong in the Eurozone, this morning, German Economic Sentiment as measured by the think tank ZEW, showed some real rot on the vine folks. The reading of the index number shows us that Economic Sentiment is at its lowest level in 2 1/2 years! The Composite Manufacturing Index (PMI) remained stable above the line in the sand figure of 50 (at 51.1). But when the Services piece is taken out, the actual Manufacturing Index fell to 49.7. That’s not good folks. However, the number was better than the forecasts, so that takes some of the sting out of report.
Speaking of Manufacturing. China printed their manufacturing index (PMI) last night, and improved from July’s number of 49.3 to 49.8. Yes, it’s below “50” but it’s hanging on folks and that’s a bright spot for global growth. Hey, you didn’t expect for China to continue to have guns a-blazin’ while the U.S. and Europe meltdown did you? Yes, China has done a good job of driving domestic demand to offset the loss of exports while the U.S. and Europe meltdown, but, exports are still “king”.
Since China’s Manufacturing report was somewhat better than forecast, and improved on July’s number, the currencies of Australia and New Zealand are booking gains this morning. The Aussie dollar (A$) is back to $1.05, and kiwi has pushed back above 83-cents!
So. It looks like my thought that this weeks’ Jackson Hole meeting was going to be the Big Kahuna for the markets is really taking shape. There are more stories about what the writer believes will happen at Jackson Hole this week, than any other story on the news wires.
Did you see what the S&P Chairman got for downgrading the U.S. credit rating? He got shown the door! Ok, he will step down next month. But don’t you find that just a little interesting? My conspiracy blood is boiling right now. I’m thinking the U.S. Gov’t decided to show the rest of the rating agencies what would happen to their leaders should they follow S&P’s downgrade with a downgrade of their own!
Then there was this. “Fears of a double-dip recession have been eased in Germany after this year’s estimated budget deficit was slashed from 2.5 to 1.5 percent. The German Finance ministry claimed its public finances will be balanced by 2014. Germany appeared to be back on top as Europe’s powerhouse economy on Monday after it announced that it cut this year’s estimated budget deficit from 2.5 percent to 1.5 percent. Monday’s reduction more than halved the 2010 deficit which stood at 3.3 percent. According to a report published by Germany’s Finance Ministry public finances will now be balanced sooner than expected.”
Way to go Germany! See. It can be done civilly and without all the drama, and political theater.
To recap – its tag team time, and Gold and Silver became tired of beating on the dollar, and tagged the currencies to take over. Gold is seeing some profit taking this morning, after getting very close to $1,900 ($1,910 in futures). The risk appetite for the markets is healthier this morning. Europe and China printed PMI’s (manufacturing), and while both printed below the “50” level, both were stronger than forecast. And so with China, the global growth traders were happy.
That’s it for today. I see my beloved Missouri Tigers football team, is ranked number 21 in the preseason poll. Not too shabby considering they lost two top players “early” to the NFL draft that went in the first 10 picks! And with that, I’ll get this out the door, and hope you have a Terrific Tuesday!
Chuck Butler
President
EverBank World Markets
Market Update 8-18
MORTGAGE MARKET UPDATE
The US stock market is being hit hard this morning on continued weakness in Europe’s bank stocks that are seeing heavy selling.This morning the bond and mortgage markets opened strong, the 10 yr note at 2.10% at 8:30, mortgage prices +8/32 (.25 bp), the DJIA futures index -231. The situation in Europe over sovereign debt problems in five of its EU countries isn’t getting any closer to a resolution. Tuesday France and German leaders met, it was in market terms a non-event; neither country is willing to do much more to come up with a workable plan, assuming of course there is a chance. Investors are increasingly more concerned the banks in Europe are unprepared for the possibility that there could be actual defaults. The infection in Europe is quickly moving to the US and the economic outlook. Banks in Europe are being hit hard today, down about 8.0% on many bank stocks, even with short selling bans in place in many countries; US and Asian banks are increasingly unwilling to lend the Europe’s banks.
The WSJ reported that U.S. regulators are stepping up scrutiny of local operations for Europe’s largest banks on concern that the sovereign debt crisis may lead to funding problems.The Federal Reserve Bank of New York has been holding talks with the lenders and sought information about their access to funds to maintain operations in the U.S., the newspaper said, citing people it didn’t identify. Europe and its regulators, the IMF and the ECB have made little or no progress toward a plan to avoid defaults; the result is dragging US stocks lower this morning and increasing the idea the US economy will decline further.
Two data points at 8:30; weekly jobless claimsincreased 9K to back above 400K to 408K, its been 16 weeks with clams at or above 400K (last week’s claims revised to 399K frm 395K). Continuing claims increased 7K to 3.702 mil. July consumer price index jumped 0.5%, over twice the expected increase (0.2%); the core rate however was up 0.2% as expected. Yr/yr overall CPI +3.6%, yr/yr on the core rate +1.8%. CPI more tame than producer prices, but may see increase next month if producers have to push through their increasing costs. There was no reaction in markets over the 8:30 data.
At 9:30 the DJIA opened down 230 points, the 10 yr note +30/32 at 2.06% -11 bp and mortgages +17/32 (.53 bp). Gold jumping over $1800.00 to $1821.00. Not a pretty picture to start the day.
Three key economic releases at 10:00.August Philadelphia Fed business index, expected at 4.0 from 3.2 in July, shocked, down to -30.7, new orders index -26.8, employment component -5.2 from +8.9 in July. The report is rocking markets even more than prior to the data; any index read under zero is considered contraction, this was a huge hit. More bad news; July existing home sales were expected to be up 3.0%, sales as reported declined 3.5% to 4.67 mil against forecasts of 4.92 mil. The only bright point today, July leading economic indicators were up 0.5%, a little higher but always overlooked by traders. The 10:00 data pushed the 10 yr note yield to 1.97% on the knee jerk reaction.
Interest rates crumbling this morning as the stock market is being hit hard. Mortgage rates and prices improving but will likely drag treasuries with lenders still facing huge problems with re-financing locks that for the most part are falling through the cracks; one lender pointing out the pull-through rate is a low as 20%. That seems extremely low, but it indicates that many of the re-finance applications will not make it to closing, either because of appraisals, credit scores, lack of equity or just backing off as rates decline.
The Troll
With the Dow on the Rocks, Rates are Rallying
Holy Moly! The economy is no where near as rosey as we’ve been led to believe. The Troll will be adding the commentary of our friend Chuck Butler from Everbank who is a wealth of information. He is an invaluable resource and specializes in Foreign currencies and all things pertinent to the markets. His articles are called “Daily Pfennings” and he will be assisting the Troll with content on the blog. Here is his offering today,
DAILY PFENNIG
In This Issue.
* Lockhart words turn Gold around!
* Eurozone GDP disappoints.
* More thoughts on Gold.
And, Now, Today’s Pfennig For Your Thoughts!
There’s Smoke.
Yesterday’s “good feeling” in the currencies and metals lasted all day! WOW! That’s pretty amazing, considering the Elvis Presley hips that have dominated the markets recently. Gold turned around yesterday and put in a very strong showing considering it was down $10 at one point in the morning. And I can hear you asking. Hey Chuck, what turned Gold around? I’m glad you asked!
Well. I’ve told you for several months now that there will eventually be a QE3. There are plenty of writers, analysts, economists, that don’t agree with that thought. But, if you believe in the old thought that “where there’s smoke, there’s fire”, then you have the reason for the turnaround in Gold yesterday. You see, Fed Head Lockhart, was speaking yesterday, and when the question to him addressed whether or not the Fed was “out of bullets”, Lockhart replied, ” We’re not out of bullets, we could purchase assets”.
Was that the Fed’s first baby-step in getting us prepared for another round of debt monetization? I truly believe so. And guess what’s just around the corner? The Fed’s Jackson Hole boondoggle, where last year’s QE2 was announced. Could the Fed use Jackson Hole to launch QE3? Maybe that’s too soon, folks. But, it’s not out of the question!
And, so. Metals traders and investors flocked back into Gold. I not only told you what I thought about investors running out of options and turning to Gold, but my friend David Galland followed that up with his version. Then I got a call from Alix Steele from the Street.com. She wanted to know my thoughts on Gold. Here are a couple of snippets from the interview. “Butler argues that the euro was once thought of as a challenger to the dollar’s reserve currency status but with that hope falling by the wayside and no other real contender people are going to gold.”
“Butler thinks gold will get back to recent highs of $1,817 an ounce and eclipse it once momentum buyers jump back into the market. “I still don’t believe that gold is a bubble … you always want to look at the longer term trends.”
The euro is a bit weaker this morning, falling back into the 1.43 handle, off by about 1/2-cent. A report this morning on Eurozone growth, is the culprit behind the 1/2-cent loss so far this morning. Eurozone growth slowed more than forecast in the second quarter. Even Germany’s economy, which is the largest economy of the Eurozone, wasn’t strong enough to pull the weak sisters up. Eurozone GDP for the 2nd QTR rose .2% VS the first QTR. But begin to become Chicken Littles, and go about screaming that the sky is falling. Eurozone GDP rose 1.7% from a year earlier. Hmmm. seems that the sky isn’t falling, just yet, eh?
And just to remind you. Merkel and Sarkozy are meeting again today. I told a reporter yesterday, that this going back to the “meeting room” for Merkel and Sarkozy was beginning to remind me of buying a new car. You know, where the salesman keeps going into the sales manager’s “magic room” to come out with another price for the car that you’ll reject! I told a guy last year, that “this is my price” don’t go back into the room, unless you can come out with “my price”. He didn’t, and I walked.
And soon the markets will walk on the Eurozone and the Merkel and Sarkozy meetings if they don’t come up with a permanent solution. All they’ve done previously is put band-aids on the problems. I’ve said it before and I’ll say it again. They need to issue a Eurobond.
A reader sent me a note yesterday, asking me what good a Eurobond would do? Well, it would reduce the interest that has to be paid, and debt servicing is going to be key in the future (just ask the U.S.!) and it would strengthen the debt rating, and not allow markets to go after a weak sister like they’ve done with Greece, Ireland and Portugal, and, tie all the Gov’t’s together. I know that each country wants to maintain its sovereignty but, hey! Didn’t they give that all up, when they merged their currencies?
To recap. the currencies enjoyed a full day of recovery yesterday with no intra-day gyrations, and Gold turned around Big Time on comments by Fed Head Lockhart regarding what bullets the Fed had left. hint, Quantitative Easing. Eurozone GDP came in weaker than expected, and has pushed the euro down 1/2-cent this morning.
Chuck Butler
President
EverBank World Markets
The Troll will try to include Chuck’s offerings as much as possible as the blog moves forward into uncharted waters.
The Troll