NEW$ & VIEW$ (11 JULY 2013)

Jobless Claims in U.S. Unexpectedly Rise to Two-Month High

First-time claims rose by 16,000 to 360,000 in the week ended July 6 from a revised 344,000, Labor Department figures showed today in Washington. Claims are difficult to adjust in July for seasonal events such as vehicle plant shutdowns and the Independence Day holiday, a Labor Department spokesman said as the data were released.

The four-week moving average, a less volatile measure than the weekly figures, climbed to 351,750 last week from 345,750.

Fed Affirms Easy-Money Stance

Bernanke sought to reassure markets that officials aren’t abandoning a broader commitment to easy-money policies.

“You can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” he said Wednesday at a conference held by the National Bureau of Economic Research, citing the high unemployment rate, low inflation and “quite restrictive” fiscal policy. He said he expects the Fed won’t raise short-term rates for some time after the unemployment rate hits 6.5%, which would be more than a full percentage point lower than its current level.

The remarks Wednesday came a few hours after minutes of the Fed’s June policy meeting showed officials deeply divided over when to start unwinding the bond-buying program. About half the officials walked into the meeting thinking the central bank might end the program altogether by the end of the year, the minutes showed. (…)

The minutes may count the number of officials who adhere to a particular view, but that obscures the fact that key Fed officials such as Mr. Bernanke, Vice Chairwoman Janet Yellen and New York Fed President William Dudley are still strongly committed to pressing forward with the program, and their views dominate the policy-making process. (…)

Before the meeting, Fed officials submitted projections for the economy and also a description of the outlook for interest rates and the Fed’s bond-buying program that they felt best suited the economic outlook. A summary of these projections described by the Fed in the minutes showed that “about half of these participants indicated that it likely would be appropriate to end asset purchases late this year.” (…)

In short, they have no clue what’s going to happen next on the economy. Not convinced? Read this: Key Passages From Fed Minutes

Mid-June, Bernanke sank stocks, now:

Bernanke Sends Stocks To New All-Time Highs

Pointing up  Meanwhile, market rates are reacting:

Banks Try to Adjust to Rate Surge  A rise in long-term interest rates is creating challenges and opportunities for the largest U.S. banks.

The full percentage-point jump in long-term rates, the sharpest increase since 2010, already has eroded $31 billion in accounting gains from banks’ securities portfolios through late June, according to Federal Reserve data.

At the same time, some bankers said the upward move in long-term rates allows them to raise prices on new commercial loans, an encouraging sign for an industry pummeled in recent years by slim lending margins. Average rates on fixed-rate 10-year commercial loans increased to 3.9% in June from 3.3% in April, according to banking software and data company Automated Financial Systems Inc. (…)

Zions Bancorp, a midsize lender in Salt Lake City with $54 billion in assets, warned investors in a recent presentation what would happen to the industry’s capital if long-term rates were to rise by three percentage points.

The amount of capital held by the industry would drop by $200 billion to $250 billion after taxes, or 17% of the tangible common equity that exists in the banking system, according to the presentation it gave investors at a conference.

That would result in $2 trillion of reduced lending capacity, Zions Investor Relations Director James Abbott said. “We have seen that movie several times,” Mr. Abbott added.

David Zalman, chief executive of Prosperity Bancshares Inc., a midsize lender based in Houston with $16.1 billion in assets, said he anticipates criticism if previous gains in the bank’s $8 billion bond portfolio turn into losses. But over the longer term, “we need rising rates to make more money,” he said.

Some smaller banks already are adjusting their prices. Kevin Cummings, chief executive of the $13 billion-asset Investors Bancorp. Inc. in Short Hills, N.J., said when long-term rates rose, his team decided to increase prices on certain commercial-real-estate and apartment loans.

Lee Roberts, chief operating officer for VantageSouth Bank in Raleigh, N.C., said he noticed rivals Wells Fargo and BB&T Corp. revising prices on certain deals upward and telling clients that existing terms can’t hold for much longer. (…)

Loan “rates are going up,” said Scott Shay, chairman of Signature Bank, an $18.5 billion-asset bank in New York. “If a bank isn’t increasing rates, frankly it is closing its eyes.”

Housing Markets Spurt in Brooklyn, Queens

The shortage of listings and frothy activity reported in the Manhattan market is broadening to communities elsewhere in the city and nearby areas, driving up the price of condos in Long Island City, co-ops in Brooklyn Heights and single family houses in White Plains.

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A series of market reports to be released on Thursday paint a picture of a hot market in the region in the second quarter as buyers—including many worried about rising interest rates on mortgages—competed for a shrinking supply of available property. There were also some negatives in the market. Tight credit conditions made it hard for would-be sellers to trade up to larger apartments, shrinking the available supply. (…)

In Brooklyn, the market was so tight that brokers brought in extra staff to handle crowds—of 50 to 60 people in some cases—that have started to show up at open houses, said Frank Percesepe, who oversees Corcoran Group’s operations in Brooklyn.

June has been the most incredible month in the history of Brooklyn sales,” Mr. Percesepe said. He said inventory fell during the second quarter even though the increasing prices had “whet the appetite of sellers” because many new listings were selling quickly. (…)

In Westchester County, Chris Meyers, the managing principal of Houlihan Lawrence, said the quarter was the strongest second period since 2007, and that since then market remained “scorching hot” into the summer. (…)

Pointing up Mr. Meyers said some buyers had locked in interest rates and were rushing to close their deals. He said he expected price increases to moderate because a bump up in interest rates and higher monthly mortgage costs would limit how much some buyers could afford to spend. (…)

Ghost  Should We Be Concerned About These Real Estate Breakdowns?

The rally over the past few years, after the huge declines in Real Estate, has been impressive to say the least. The 4-pack above reflects a variety of leading Real Estate indexes, ETF’s and one stock that is key to home improvements. What do they all have in common? After huge rallies they all formed bearish rising wedges with support lines being broken of late!

 

…And these turns of events (chart from ISI)?

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Prices for U.S. imports and exports fall in June

Export prices fell by 0.1 percent, matching the expectation in a Reuters poll, Labor Department data showed on Thursday.

The drop probably reflects weakness in global demand which has been hit by Europe’s debt crisis and slowing growth in China.

Import prices slipped 0.2 percent last month, dragged down by another month of declining costs outside of the fuels category. Petroleum prices rose 0.2 percent.

Prices for both imports and exports have fallen every month since March, the longest such streak since 2008 when the world was mired in a financial crisis.

BOJ Upgrades Assessment of Economy

Using its most optimistic language in more than two years, the Bank of Japan upgraded its assessment of the economy Thursday, saying it is starting to “recover moderately.” (…)

But speculation for fresh easing measures may surface in the autumn or later, as the central bank slightly lowered its projected inflation figures for the current and following fiscal years and cut its growth forecast for the current fiscal and subsequent two fiscal years.

SLOW AND SLOWER

Auto  China Car Exports Stall

China’s ambition to become an auto export powerhouse like Japan and Germany has hit a speed bump with shipments of domestic brands falling for the last two months in a row.

The country exported 84,400 cars last month, around one-fifth fewer than the same period last year, an auto industry group said on Wednesday. That follows a 16% slump in May—the first year-over-year drop in five years. (…)

June’s export drop was disclosed on the same day that statistics showed a 11% rise in total vehicles sold in China last year, indicating the local market remains solid despite slowing domestic economic growth. (…)

Chinese car makers captured 38% of the country’s passenger-vehicle sales in June, down from 47% at the end of last year. The figures suggest foreign-branded cars continue to dominate the market, pointing to problems for Chinese brands facing a market flush with auto factories.

CLSA auto analyst Scott Laprise said some Chinese car makers had turned to export markets because they struggled to sell their cars at home. The country has about 140 domestic auto makers.

The yuan has gained this year about 20% against the Japanese yen and 10% against the Korean won.

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Pointing up  Total auto sales in China reached 1.75 million vehicles in June, while sales of passenger vehicles rose 9.3% to 1.4 million units. In the first half of this year, vehicle sales grew 12% to 10.78 million, and  passenger cars rose 14% to 8.67 million, CAAM said.

China’ Crude-Oil Imports Fell in the First Half

China’s crude-oil imports fell in the first half of 2013, marking the first January-June contraction since 2009, but the second half could see a pickup as refineries emerge from maintenance.

China imported 138 million metric tons, or an average of 5.6 million barrels a day, of crude in the first half of 2013, preliminary data from the General Administration of Customs showed Wednesday. This was 1.4% less than in the first half of 2012.

In contrast, China’s crude imports rose by 7% in the first half of 2011 and 11% in January-June 2012.

Crude imports could accelerate in the third quarter now that some domestic refineries are restarting operations after a period of heavy maintenance, Barclays said Wednesday. (…)

In June, the International Energy Agency predicted that China would use 3.8% more oil this year, while the U.S. government’s Energy Information Administration put China’s oil demand growth at 4.1%. Both the IEA and EIA trimmed their forecasts from ones made earlier in the year.

China relies on imports for around 60% of the oil it uses, and domestic output has remained stagnant for the past few years.

Indonesia Raises Rates as Other Asian Banks Stand Pat

Indonesia’s central bank, caught between rising inflation and weakening growth, raised its main interest rate by a half-percentage point Thursday, while other central banks across Asia stood pat as sluggish exports and a slowdown in China weigh on their economies.

Bank Indonesia had just lowered its growth forecast for the year but said the larger-than-expected rate increase was necessary after last month’s reduction in fuel subsidies drove fuel prices sharply higher. It was the second straight month the bank has raised rates as inflation, which had fallen from a high of 7.02% in January 2011 to a low of 4.57% two years later, again presses upward. (…)

The decision came the same day as central banks in South Korea and Japan held rates steady and lowered their inflation outlooks, while Malaysia’s central bank stayed on hold for a 13th consecutive meeting. The Bank of Thailand held rates steady on Wednesday.

The decisions reflect how Indonesia is increasingly out of step with its neighbors, which are worried about their growth prospects as China’s economy loses momentum and recovery in the West is slow in coming. (…)

Indonesia’s move shows how some countries are more vulnerable to global economic forces like the expected tapering of the U.S. Federal Reserve’s bond-buying program. Indonesia is one of the few countries in the region to run a current-account deficit, which makes it especially sensitive to outflows of foreign capital at a volatile time in global markets.

Money has flowed out of emerging markets since the Fed starting talking in May about scaling back its quantitative-easing program. That knocked the rupiah perilously close to the key level of 10,000 to the dollar, just when Indonesia could have used a stronger currency to damp growing price pressures. (…)

Brazil holds course on inflation fight
Central bank increases benchmark rate by 50bp

The central bank’s monetary policy committee, Copom, increased the benchmark Selic rate by 50 basis points to 8.5 per cent, its third consecutive increase bringing the total rise since it started tightening in April to 125 basis points.

Brazil Signals World’s Biggest Key Rate Rise Far From Over

Brazil’s central bank raised the benchmark interest rate a third consecutive time and said it was giving continuity to the world’s biggest tightening cycle, signaling increases may be extended through year-end as policy makers battle inflation.

Brazil is one of only three countries among 50 major economies tracked by Bloomberg that is raising borrowing costs this year as above-target inflation undercuts months of government stimulus by curbingretail sales growth. After a quarter-point rate increase in April, policy makers in Brazil doubled the pace in May and reiterated warnings that the outlook for inflation remains unfavorable.

 

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