NEW$ & VIEW$ (28 AUGUST 2013)

Emerging-Market Rout Intensifies

The slide in many emerging-markets currencies and stocks intensified and oil prices climbed farther, as investors continued to worry about a possible U.S. strike against Syria.

The Indian rupee and Turkish lira—no strangers to selloffs since May—fell heavily, even by recent standards. The rupee plunged by 3.3% while the lira sank by 1.7%. Both hit record lows for the second consecutive day.

Syria isn’t a major oil producer, but there are fears that U.S. action could touch off a wider conflict. (…) Crude-oil futures spiked for a second day, with the front-month Brent contract hitting an intraday high of $117.34 a barrel in Asian trade. Recently, ICE Brent was $1.42 higher on the day at $115.78 a barrel. Nymex WTI also gained more than a dollar, to an 18-month high above $110 a barrel. (…)

Oil-producing Russia and Mexico have also seen their currencies slide, signaling that, for now, this is a broad-based wave of market nerves.

RICHMOND FED SURVEY UP IN AUGUST

The composite index of manufacturing activity rebounded in August, climbing twenty-five points above the July reading to 14. The imagecomponents of that index all rose this month, with the index for shipments jumping to 17 from the previous reading of -15 and the index for new orders moving to 16 from -15. The marker for the number of employees picked up to 6 from July’s reading of 0.

Capacity utilization made a weak comeback, with the index ending the survey period at 3 compared to last month’s index of -9. The gauge for the backlog of orders declined by much less than a month ago, with that index settling at -6 from the previous reading of -24.

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The index for the number of employees moved up to 6 in August following a flat reading a month ago. The indicator for the average manufacturing workweek also gained, picking up six points to post a reading of 8. In addition, average wage growth intensified, pushing the index to 13 from July’s reading of 8.

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Mortgage applications fall as rates hit 2013 high: MBA

Applications for U.S. home loans fell for a third straight week as average mortgage rates hit their highest level this year, although demand for purchase loans increased, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.5 percent in the week ended August 23, after sliding 4.6 percent the prior week. (…)

The refinance index fell 5.4 percent last week, and the refinance share of total mortgage activity slid to 60 percent, the lowest since April of 2011.

The gauge of loan requests for home purchases, a leading indicator of home sales, held up better, rising 2.4 percent. (…)

(CalculatedRisk)

U.S. Case-Shiller Home Price Index Increase Eases Again

Home price inflation eased further in June. The seasonally adjusted Case-Shiller 20 City Home Price Index rose 0.9% (12.1% y/y) on a seasonally adjusted basis after a 1.0% May gain. It was the third consecutive month of lessened increase following the 1.9% March jump. The result was to drop the 3-month annualized rate of increase to 15.3% from its record 20.2% recorded in March. Home prices in the narrower 10 city group rose 1.1% in June (11.9% y/y).

 

More Young Adults Live With Parents

In a report on the status of families, the Census Bureau on Tuesday said 13.6% of Americans ages 25 to 34 were living with their parents in 2012, up slightly from 13.4% in 2011. Though the trend began before the recession, it accelerated sharply during the downturn. In the early 2000s, about 10% of people in this age group lived at home.

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Recent surveys by Pew found over 60% of people ages 18 to 34 knew someone who had moved back in with their parents because of the economy, he said, and that four of five people ages 25 to 34 who were living with their parents were satisfied with the arrangement.

The latest findings have important implications for the nation’s housing market and broader recovery, since they suggest fewer young Americans are buying houses, furniture and appliances—purchases that fuel much of the country’s economic growth.

Japan Auto Makers Cut Domestic Production

(…) The across-the-board decline in production suggests that there won’t be an immediate pick up in capital spending in Japan’s auto industry, undermining the efforts of Prime Minister Shinzo Abe to fix one of the weak links in the nation’s economic turnaround.

While Toyota and all other Japanese car makers reported solid quarterly profits in their latest earnings results, the growth is coming from overseas, which has made them reticent about increasing outlays at their domestic facilities.

Euro zone loan slump puts onus on ECB to keep rates low

Lending to the euro zone’s private sector contracted further in July, dragging on the euro zone’s nascent economic recovery and keeping up pressure on the European Central Bank to maintain its expansive monetary policy.

Private sector loans shrank by 1.9 percent from the same month a year ago, ECB data released on Wednesday showed.

A breakdown of the region-wide figure, which matched the lowest reading in a Reuters poll of economists, showed declines were generally steeper on the euro zone’s struggling periphery, adding to evidence that the recovery is uneven. (…)

Adjusted for sales and securitization, the drop in loans to the private sector was 1.4 percent on an annual basis, the biggest on the record.

An ECB survey released in July showed that euro zone banks, facing tougher capital requirements, tightened lending standards for both companies and home loans in the second quarter even though their access to funding eased. (…)

 
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