http://www.zerohedge.com/fullrss2.xml en 3 WTF Charts http://www.zerohedge.com/news/2014-07-30/3-wtf-charts <p>Something doesn't add up here...<em> (and rumors of heavy institutional selling is not helping)</em></p> <p>&nbsp;</p> <p><strong>Breadth is weak...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD_0.jpg" width="600" height="423" /></a></p> <p>&nbsp;</p> <p>and <strong>flows are diverging...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD1_0.jpg" width="600" height="359" /></a></p> <p><strong>The average Russell 2000 stock is -20% under its 52 week high</strong></p> <p>And <span style="text-decoration: underline;"><strong>High Yield credit is flashing bright red...</strong></span></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_AD2_0.jpg" width="600" height="319" /></a></p> <p>&nbsp;</p> <p>As Barclays Phil Solarz warns,</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>One of the things that sticks in my mind from 2007 (and I am NOT suggesting a 2007/2008 repeat here) is the fact that the credit markets moved before equity markets</strong>....and not just once, but three or four times through 2007 and 2008.</p> <p>&nbsp;</p> <p>I recall looking at charts like the attached and <strong>thinking "why has this correlation broken down?"</strong></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Inevitably, the credit markets would be right, and the equity market would eventually catch up and re-establish the correlation.</strong></span></p> <p>&nbsp;</p> <p>The chart above shows (the inverse of) the junk-less-10 year spread vs the S&amp;P. <strong>The tight correlation of the past 12 months (and actually, the last 3 years) has broken down this month. </strong></p> </blockquote> <p><em>Charts: JC O'Hara at FBN Securities, @Not_Jim_Cramer, Barclays<br /></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="795" height="560" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140730_AD_0.jpg?1406731219" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/3-wtf-charts#comments Barclays Equity Markets High Yield Jim Cramer Russell 2000 Wed, 30 Jul 2014 19:21:48 +0000 Tyler Durden 492057 at http://www.zerohedge.com White House Retaliates, "Condemns" Israeli Shelling Of UN School In Gaza http://www.zerohedge.com/news/2014-07-30/white-house-retaliates-condemnds-israeli-shelling-un-school-gaza <p>It was only a matter of time. </p> <p>Following yesterday's scandalous release of the <a href="http://www.zerohedge.com/news/2014-07-29/shocked-white-house-slams-fabrication-after-israel-tv-leaks-damning-transcript-obama">Obama-Natanyahu phone call transcript </a>by Israel's Channel 1, which officials on both sides have claimed was a fake (due to its clearly negative implications for US foreign policy which appears painfully weak) yet which the media outlet has defended as authentic, citing a "senior American official" as a source, one was wondering how long it would take for the White House to "teach" Israel a lesson, and put it in its place. The answer: less than 24 hours. <strong>Moments ago, the White House officially "condemned" the shelling of a United Nations school in Gaza that local authorities estimated killed at least 15 Palestinians who were sheltering there. </strong></p> <p>Still, to appear measured, the US also condemned Hamas, although indirectly: "We are extremely concerned that thousands of internally displaced Palestinians who have been called on by the Israeli military to evacuate their homes are not safe in U.N. designated shelters in Gaza," White House National Security Council spokeswoman Bernadette Meehan said, cited by Reuters. "<strong>We also condemn those responsible for hiding weapons in United Nations facilities in Gaza."</strong></p> <p>As AP adds, this is "the sharpest criticism the U.S. has leveled at Israel over the more than three weeks of fighting between Israel and Hamas militants in Gaza." In fact, it may be the first time in recent history when the US has condemned anything to do with Israel. </p> <p>Exciting, yes? </p> <p>No, not really, because as everything else coming out of the White House in the past 6 years, this too was merely for popular theater purposes. </p> <p>How do we know? Because this hit moments later.</p> <blockquote class="twitter-tweet" lang="en"><p>JUST IN: US is re-supplying Israel Defense Forces with several categories of ammunition. Via <a href="https://twitter.com/vplus">@vplus</a></p> <p>— PzFeed Top News (@PzFeed) <a href="https://twitter.com/PzFeed/statuses/494538584234688512">July 30, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"><p>MORE: U.S. is resupplying Israel with certain ammunition. Would come from weapons stockpile U.S. keeps inside Israel. CNN</p> <p>— PzFeed Top News (@PzFeed) <a href="https://twitter.com/PzFeed/statuses/494541532608081920">July 30, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script> http://www.zerohedge.com/news/2014-07-30/white-house-retaliates-condemnds-israeli-shelling-un-school-gaza#comments Israel national security Reuters White House Wed, 30 Jul 2014 19:05:51 +0000 Tyler Durden 492054 at http://www.zerohedge.com Goldman's FOMC Post-Mortem: "Slightly Hawkish Tilt" http://www.zerohedge.com/news/2014-07-30/goldmans-fomc-post-mortem-slightly-hawkish-tilt <p>As always, for the best take of what the Fed was thinking, skip Hilsenrath and go straight to the people who provide it with its talking points. Here is Goldman's Jan Hatzius with hos&nbsp; post-mortem of the just released FOMC minutes.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Slightly Hawkish Tilt to July FOMC Statement</strong></p> <p>&nbsp;</p> <p>BOTTOM LINE: The July FOMC statement showed more of an acknowledgement of firming inflation and reduction in downside risks to inflation than we had expected. Changes to language on the labor market were mixed. Philadelphia Fed President Plosser lodged a hawkish dissent. </p> <p>&nbsp;</p> <p>MAIN POINTS:</p> <p>&nbsp;</p> <p>1. The statement's language was adjusted to indicate that inflation "moved somewhat closer to the Committee's longer-run objective," rather than "has been running below the Committee's longer-run objective." In a similar vein, the Committee now judges "that the likelihood of inflation running persistently below 2 percent has diminished somewhat." </p> <p>&nbsp;</p> <p>2. Language on the labor market was upgraded slightly. "Labor market conditions improved, with the unemployment rate declining further," replaced "labor market indicators generally showed further improvement." However, the statement added new language indicating that "a range of labor market indicators suggests that there remains significant underutilization of labor resources," providing a dovish counterweight. </p> <p>&nbsp;</p> <p>3. The pace of asset purchases will be tapered by a further $10bn/month (to $25bn/month) starting in August. In an accompanying statement, the New York Fed indicated that purchase distributions will remain unchanged, but the number of individual Treasury operations per month will continue to be reduced. </p> <p>&nbsp;</p> <p>4. Philadelphia Fed President Plosser dissented to the statement, indicating discomfort with the "considerable time" language used to describe the expected delay between the end of QE and the first rate hike. </p> </blockquote> http://www.zerohedge.com/news/2014-07-30/goldmans-fomc-post-mortem-slightly-hawkish-tilt#comments Jan Hatzius Market Conditions New York Fed Unemployment Wed, 30 Jul 2014 19:01:53 +0000 Tyler Durden 492056 at http://www.zerohedge.com Stocks Give Up Post-FOMC Gains, Dollar Drops, Gold Flat http://www.zerohedge.com/node/492055 <p>Oil prices are holding below $100 and gold (after oscillating) is flat post FOMC. <strong>Stocks have roundtripped</strong> and given up the kneejerk gains as the USDollar has sold off notably (retracing its gains from GDP earlier in the day). <strong>Treasury yields are lower post-FOMC</strong>.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_fomc2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_fomc2_0.jpg" width="600" height="468" /></a></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_fomc1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_fomc1_0.jpg" width="600" height="948" /></a></p> <p>&nbsp;</p> <p>Charts: Bloomberg</p> http://www.zerohedge.com/node/492055#comments Wed, 30 Jul 2014 19:00:00 +0000 Tyler Durden 492055 at http://www.zerohedge.com G7 Condemns Acts In Ukraine, Threatens To "Intensify The Costs" On Russia http://www.zerohedge.com/news/2014-07-30/g7-condemns-acts-ukraine-threatens-intensify-costs-russia <p>As had been rumored all day, The G7 just issued yet another statement on Ukraine showing its wholehearted support for sanctions:</p> <ul> <li><strong>*G-7 LEADERS ISSUE STATEMENT CONDEMNING RUSSIAN ACTS IN UKRAINE</strong></li> <li><strong>*G-7 LEADERS SAY READY TO 'INTENSIFY THE COSTS' ON RUSSIA</strong></li> </ul> <p>The statement, released by The White House, also demands "transparent" access to the MH17 crash site. As this was released, the <strong>EU announced its sanctions list (8 people, 3 entities)</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_g7.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_g7_0.jpg" width="600" height="575" /></a></p> <p>&nbsp;</p> <p>As Bloomberg reports, The G7 Statement noted,</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“We once again condemn Russia’s<br /> illegal annexation of Crimea, and actions to de-stabilize eastern Ukraine,” G-7 leaders say in statement released by White House.</p> <p>&nbsp;</p> <p><strong>“Those actions are unacceptable and violate international law”</strong></p> <p>&nbsp;</p> <p><strong>Demand “prompt, full, unimpeded and transparent” intl investigation into downing of Malaysian Airline plane</strong></p> <p>&nbsp;</p> <p>“We remain convinced that <strong>there must be a political solution to the current conflict,” yet ready to add more sanctions if Russia doesn’t change course</strong></p> </blockquote> <p>Then Europe released its sanctions list:</p> <ul> <li><strong>*EU ADDS EIGHT PEOPLE, THREE ENTITIES TO UKRAINE SANCTIONS LIST</strong></li> <li><strong>*EU NAMES RUSSIAN OLIGARCH ARKADY ROTENBERG TO SANCTIONS LIST</strong></li> <li><strong>*EU ADDS RUSSIA'S YURIY KOVALCHUK, ALEXEY GROMOV TO BLACKLIST</strong></li> </ul> <p>Full list here:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_g71.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_g71.jpg" width="600" height="2355" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="778" height="745" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140702_g7.jpg?1406744448" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/g7-condemns-acts-ukraine-threatens-intensify-costs-russia#comments Ukraine White House Wed, 30 Jul 2014 18:20:53 +0000 Tyler Durden 492053 at http://www.zerohedge.com Fed Tapers Another $10 Billion, Raises Inflation Concerns, Plosser Dissents - Statement Redline http://www.zerohedge.com/news/2014-07-30/fed-tapers-another-10-billion-raises-inflation-concerns-plosser-dissents <p>As expected, The FOMC <strong>continued its taper pace at $10bn</strong> but what was supposed to be a 'steady as she goes' statement had a few surprises:</p> <ul> <li><strong>*PLOSSER DISSENTS ON DECISION, CITING GUIDANCE ON RATE OUTLOOK</strong></li> <li><strong>*FOMC SEES SIGNIFICANT UNDERUTILIZATION OF LABOR RESOURCES</strong></li> <li><strong>*FOMC: ODDS OF PERSISTENT SUB-2% INFLATION `DIMINISHED SOMEWHAT'</strong></li> </ul> <p>More of the same but some <strong>modestly hawkish sentiment sneaking i</strong>n regarding improving labor markets. <span style="text-decoration: underline;">Oddly - no trade recommendations from Yellen</span>.&nbsp; </p> <p>Of note, the addition of the following language about labor slack:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>... a range of labor market indicators suggests that there remains significant underutilization of labor resources...</strong></p> </blockquote> <p>Remember when the Fed had a 6.5% unemployment target for "slack"? It appears that the Fed continues to understand that it is not just jobs, part-time agem, but wages that matter. And as we have shown repeatedly, real wages continue to decline.</p> <p>As for inflation, the language...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"inflation running persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term"</p> </blockquote> <p>... has been struck, and replaced with the following:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable...&nbsp; the likelihood of inflation running persistently below 2 percent has diminished somewhat</p> </blockquote> <p>Plosser objected "<em>to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for "a considerable time after the asset purchase program ends," because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals."</em></p> <p>The conclusion: "<em><strong>T</strong><strong>he Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions."</strong></em></p> <p>So... rate hike any second, right?</p> <p><strong>Market Pre-FOMC:</strong> S&amp;P Futs 1961.5, 10Y 2.55%, JPY 102.90, Gold $1294</p> <p><em>Full statement redline:</em></p> <p><iframe src="//www.scribd.com/embeds/235470248/content?start_page=1&amp;view_mode=scroll&amp;access_key=key-W4JNNdF2gxYQSvhPAnoN&amp;show_recommendations=false" width="100%" height="600" frameborder="0" scrolling="no"></iframe></p> http://www.zerohedge.com/news/2014-07-30/fed-tapers-another-10-billion-raises-inflation-concerns-plosser-dissents#comments Market Conditions Unemployment Wed, 30 Jul 2014 18:03:41 +0000 Tyler Durden 492052 at http://www.zerohedge.com WTI Crude Oil Tumbles Below $100 - 10-Week Lows http://www.zerohedge.com/news/2014-07-30/wti-crude-oil-tumbles-100-10-week-lows <p>It appears global geopolitical risk is fixed... <strong>WTI crude futures have tumbled back below $100 this afternoon to their equal lowest since early May</strong>. Despite warnings from Russia over higher energy prices, oil is well below MH17 headlines levels...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_oil.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_oil_0.jpg" width="600" height="488" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1056" height="858" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140702_oil.jpg?1406742610" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/wti-crude-oil-tumbles-100-10-week-lows#comments Crude Crude Oil fixed headlines Wed, 30 Jul 2014 17:51:12 +0000 Tyler Durden 492051 at http://www.zerohedge.com FOMC Preview: Dashboards, Dissent, & "Degree-Of-Accommodation" Differences http://www.zerohedge.com/news/2014-07-30/fomc-preview-dashboards-dissent-degree-accommodation-differences <p>"More of the same," should summarize today's FOMC statement. There will be no press conference or refresh of the 'dot plot' economic projections. The Fed is expected to <strong>continue to taper by $10 billion</strong> with confirmation that the "growth meme" is playing out just as they projected (especially after today's GDP print). Goldman believes the <strong>focus will be on the jobs 'dashboard' and recent inflation data</strong> enables the dovish Fed to argue recent moves were noise and stay easier for longer. The downside risk (for markets) may be that Fed hawks will likely have little luck in altering the way forward guidance is employed by the Fed (and chatter over a <strong>Fisher dissent is possible</strong>).</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>RanSquawk's FOMC PREVIEW</strong></span></p> <ul> <li>Fed expected to taper by USD 10bln again, taking monthly bond buys down to USD 25bln from USD 35bln</li> <li>Yet again, all focus on rate pathway and projections for the first Fed Fund Rate (FFR) hike by Fed officials</li> <li>There will be no press conference from Fed Chair Yellen or release of Summary of Economic Projections alongside the decision</li> </ul> <p><strong>TAPERING: </strong>The latest announcement from the Fed which coincides with a slew of key economic data such as an initial estimate of growth in the Q2 and the monthly jobs report release by the BLS is expected to result in the <strong>Federal Reserve members agreeing on another USD 10bln taper</strong>. Likelihood of a larger USD 15bln taper are rather small, as this would almost inevitably risk resulting in a repeat of the “taper tantrum” price action observed last year.</p> <p><strong>RATES: The accompanying statement is likely to be tweaked to emphasise not only the pickup in growth, but also the subdued and contained nature of inflation expectations. </strong>At the same time, members of the Federal Reserve board will continue to actively look at various price measures including wage inflation and debate on the best method for raising rates. As such, <strong>despite a potentially more upbeat statement, Fed hawks will likely have little luck in altering the way forward guidance is employed by the Fed</strong>, with Fed Fund Rate futures pricing in the first rate hike in June 2015. There is however a risk as noted by analysts at JP Morgan that changing description of unemployment from “elevated” to “somewhat elevated” would allow for a more gradual pivot toward recognising progress toward full employment mandate and therefore could pose a risk to current projected rates path. No one on the FOMC is expected to dissent this time although there is an outside chance that Fisher could, after recently saying that waiting a “considerable time” for the first rate hike implies too long a wait.</p> <p><strong>MARKET REACTIONS: </strong>Given the expectation of a more upbeat picture on the employment situation, <strong>there is a risk that that the decision could be interpreted as slightly more hawkish as the Fed move nearer to full employment.</strong> At Yellen’s semi-annual testimony, the Fed chair suggested rates could rise sooner than is currently priced in if the employment situation improves and hence there is a risk of USD strength, downside in Treasuries, steepening of the Eurodollars curve, and downside in equity prices. <strong>Conversely if the FOMC continue to state that unemployment remains elevated, then the statement will likely be viewed as more dovish and could weigh on the USD</strong>. It is worth noting that due to the close proximity of this decision to the release of US GDP and Nonfarm Payrolls that any market reaction could be relatively muted.</p> <p>&nbsp;</p> <p><strong>Goldman expects very little change to the FOMC statement</strong>. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The <strong>FOMC might choose to upgrade the language on growth in economic activity somewhat</strong>, and it might also strengthen the language on labor market indicators a touch in recognition of the strong June employment report.</p> <p>&nbsp;</p> <p>For the most part, however, recent data have supported the characterization of current conditions in the June statement. In particular, the softer June CPI print likely reinforced the Committee’s decision to downplay the firmer inflation prints seen from March to May, and <strong>weak housing starts and new home sales reports have likely reinforced concern about the housing sector.</strong></p> </blockquote> <p>But suggest the focus will be on the jobs dashboard:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_fomc.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140730_fomc_0.jpg" width="600" height="1087" /></a></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Credit Suisse is a little more hawkish</strong></span>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The easing should end with the Fed’s final QE3 purchases in October. <strong>And if current economic and price trends continue, we expect the Fed to adhere to its forward guidance and reduce the degree of policy accommodation.</strong></p> <p>&nbsp;</p> <p>An adjustment in accommodation probably still is far from imminent, but we now expect the <span style="text-decoration: underline;"><strong>Fed’s first interest rate hike to come in Q3 2015 rather than our earlier expectation of Q4 2015.</strong></span></p> <p>&nbsp;</p> <p>In its June 18 policy statement, the FOMC “reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate,” and it will probably do the same on July 30. <span style="text-decoration: underline;"><strong>In fact, we look for few changes in language from the FOMC today.</strong></span></p> <p>&nbsp;</p> <p>Assuming continued recovery in the labor market, and modest, though building, price pressures, <strong>the Fed will be forced to change its message in the months ahead, explaining that an “appropriate” degree of policy accommodation may well become a “lessened” degree of accommodation.</strong></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="826" height="798" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140730_fomc1.jpg?1406738254" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/fomc-preview-dashboards-dissent-degree-accommodation-differences#comments BLS Bond CPI Credit Suisse Federal Reserve Fisher Housing Starts Monetary Policy New Home Sales Price Action recovery Testimony Unemployment Wed, 30 Jul 2014 17:32:50 +0000 Tyler Durden 492050 at http://www.zerohedge.com French Housing "In Total Meltdown", "Current Figures Are Disastrous" http://www.zerohedge.com/news/2014-07-30/french-housing-total-meltdown-current-figures-are-disastrous <p>If Venezuela is the case study of a country in the late stages of <a href="http://www.zerohedge.com/news/2014-07-22/venezuelas-transformation-socialist-utopia-nearly-complete-its-factories-grind-halt">transition into a socialist utopia</a>, then France is the clear runner up. The most recent case in point, aside from the already sliding French economy, whose recent contraction can be best seen be deteriorating PMI data...</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07-overflow/France%20vs%20Europe%20PMI.gif" width="374" height="320" /></p> <p>... which hints at the dreaded "triple dip" recession, nowhere is the economic collapse in France more evident than in its housing market which as even <a href="http://www.bloomberg.com/news/2014-07-29/housing-market-in-france-in-meltdown-after-hollande-rent-caps.html">Bloomberg admits</a>, citing industry participants, is now "<strong>in total meltdown.</strong>"</p> <p>The reason? The belief of the socialist president that a few economists know better than the overall market, especially when the sanctity of the "fairness doctrine" and the greater good is to be upheld at all costs. To wit: "French President Francois Hollande’s government may have made a housing slump worse, pushing the construction market to its lowest in more than 15 years. <strong>Housing starts fell 19 percent in the second quarter from a year earlier, and permits -- a gauge of future construction -- dropped 13 percent, the French Housing Ministry said yesterday.</strong>"</p> <p>The reason: a law that was passed this year that seeks to make housing more affordable by <strong>capping rents in expensive neighborhoods. </strong>To protect home buyers, the law also boosted the number of documents that must be provided by sellers, leading to a decline in home sales and longer transaction times. </p> <p>Of course, it didn't take long for the government to realize its mistake and to scramble to adjust the rules, but "<strong>the damage is done, </strong>threatening France’s anemic recovery that’s already lagging behind those of the U.K. and Germany."</p> <p>Enter the soundbites: <strong>“Construction is in total meltdown,” </strong>said Dominique Barbet, an economist at BNP Paribas in Paris. “It’s difficult to see how the new housing law is not to blame.”</p> <p>Barbet says the drop in home building lopped 0.4 points off France’s gross domestic product growth last year and cut the pace of expansion by a third in the first quarter. <strong>Expenditure in the sector was at its lowest level ever as a portion of total real GDP in the first quarter at 4.7 percent, down from 6.3 percent in the first three months of 2007, he estimates</strong>.</p> <p>Sales of new-build homes fell 5 percent in the first quarter from a year earlier and are down by about a third compared with their level in 2007, according to Credit Agricole. </p> <p>It's not just the government to blame, though: central planning, which has made the rich richer beyond their wildest dreams has pushed prices near all-time highs in the Paris are, making real estate inaccessible to all but the richest, and leading a crunch in new construction and the associated spending. This is further impacted by the country’s record jobless claims, which in turn is leading to a plunge in sales and profits at building material and electrical equipment makers including Cie. de Saint-Gobain SA, Lafarge SA, Vicat SA, Schneider Electric SE, Legrand SA and Rexel SA. </p> <p>Enter more soundbites: "<strong>Current figures are worrying and will be disastrous if nothing is done; clients of the building sector are sounding the alarm bell,</strong>” Pierre-Andre de Chalendar, chief executive officer of Saint-Gobain, said this month. “<strong>It’s as though everything is being done to discourage investment in housing</strong>.” </p> <p>Alternatively, it is as if everything is done by a socialist government to <strong>boost </strong>the economy. The outcome almost without fail is the same. Alain Dinin, chairman of property company Nexity (NXI), concurs.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“The French residential real estate market has been in a particularly tough situation,” he told investors after last week posting a drop in first-half revenue. “A host of complex regulations have been introduced and, most importantly, buyer sentiment has suffered. All those factors have combined to slow the already historically-low rate of new homes entering the market.” </p> </blockquote> <p>The direct threat of this housing collapse is that the country's already lowered GDP forecast may end up sliding to 0%, if not negative:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Reduced home construction is threatening Hollande’s goal of increasing GDP by 1 percent this year. The International Monetary Fund slashed its 2014 French growth forecast to 0.7 percent this month from 1 percent previously. The IMF expects expansions of 1.9 percent in Germany and 3.2 percent in the U.K., as well as growth of 1.2 percent in Spain.</p> <p>&nbsp;</p> <p>Hollande, who has been trying to revive an economy that has barely grown in two years, is grappling with a record 3.3 million jobless claims and an approval rating that’s at the lowest level ever for any French president.</p> <p>&nbsp;</p> <p>Construction has the advantage of being an industry that’s easy to revive and lifts the broader economy by leading to the hiring of less-skilled workers and spurring private investment, economists say.</p> <p>&nbsp;</p> <p>“A recovery in construction would help the rebound but it won’t happen without government initiative,” said Ludovic Subran, chief economist at Euler Hermes in Paris. Building is “a sector where the impact on growth and employment is felt immediately.” </p> </blockquote> <p>Sadly, the underlying problem is one which even China has figured out has no solution, and where a housing sector saddled with insurmountable debt has only one short-term "fix" - even more debt to boost sales for another quarter or two, while kicking the can of the inevitable collapse a little further, assuring that the plunge, when it comes, will be worse than anything experienced. </p> <p>In France, it is no different, and the "solution" is to do more of what has not worked:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>State-controlled financial institution Caisse des Depots is starting talks with public and private investors to raise funds to build several tens of thousands homes in the greater Paris region, where the lack of available land and a rising population has boosted housing prices.</strong></p> <p>&nbsp;</p> <p>“If we invest public money and funds from the Caisse, we must lure private investors,” Caisse des Depots CEO Pierre-Rene Lemas said in a July 6 interview. “Some talks are starting with a view to conclude by the end of the year.” <strong>Sylvia Pinel, who replaced former housing minister Cecile Duflot in April, has also introduced measures to revive the construction market, </strong>and cut some rules to reduce construction costs.</p> </blockquote> <p>At the end of the day, the only thing left is what has so far prevented the world from imploding since the Lehman collapse on the back of trillions in central bank liquidity: preserving public confidence at all costs.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>“What is important for France is to reassure people, to reassure everyone who wants to invest and to restore confidence</strong>,” Lafarge CEO Bruno Lafont said in an interview with Bloomberg Television last week, calling for simpler rules, lower construction costs, and incentives for institutional investors to invest more in housing. </p> </blockquote> <p>But, as Bloomberg summarizes it best: "<em><strong>It may be too little too late.</strong></em>"</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="640" height="380" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Hollande%20watch_0.jpg?1406738402" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/french-housing-total-meltdown-current-figures-are-disastrous#comments China Fail France Germany Gross Domestic Product Housing Market Housing Prices Housing Starts Institutional Investors International Monetary Fund Lehman Meltdown Real estate Recession recovery Wed, 30 Jul 2014 17:20:24 +0000 Tyler Durden 492048 at http://www.zerohedge.com Treasury Yields Rise Most In 9 Months, Weak 7 Year Auction Does Not Help http://www.zerohedge.com/news/2014-07-30/treasury-yields-rise-most-9-months-weak-7-year-auction-does-not-help <p>Treasury yields are surging across the complex with the long-end steepening notably. <strong>Today's 10.5bps jump in 10Y yields is the biggest percentage shift since early November 2013</strong>... and a significant tail in the 7Y auction just made things worse.</p> <p>The long-end is suffering most...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_10Y.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_10Y_0.jpg" width="600" height="298" /></a></p> <p>&nbsp;</p> <p>But the selling is across the complex...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_10Y1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140702_10Y1_0.jpg" width="600" height="315" /></a></p> <p>&nbsp;</p> <p>It is unclear how much of today's bond sell-off was a factor in the just concluded 7 Year Treasury offering, but what is clear is that <strong>unlike yesterday's strong 5 Year issuance, today's auction was disappointing</strong>, starting with the High Yield of 2.25%, the highest since April's 2.32% and tailing the 2.24% When Issued by 1 bp. And while the Bid to Cover was a slight improvement from last month's 2.435 rising to 2.581, it was the internals where we saw a flight of Direct bidders, who only took down 15.2% of the auction. This was the lowest allotment since July 2012. The offset: a pick up by Indirects from 40.6% to 47.4% while Dealers ended up with 37.4% of the auction.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07-overflow/7%20Year.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/07-overflow/7%20Year_0.jpg" width="600" height="351" /></a></p> <p><strong>Regardless of the auction one thing is clear, the shorting of bonds today will continue until the squeeze, as has been the case for all of 2014, returns.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="959" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140702_10Y1.jpg?1406740240" /> </div> </div> </div> http://www.zerohedge.com/news/2014-07-30/treasury-yields-rise-most-9-months-weak-7-year-auction-does-not-help#comments 7 Year Treasury Bond High Yield Wed, 30 Jul 2014 17:14:01 +0000 Tyler Durden 492049 at http://www.zerohedge.com