New Home Sales
And the overnight futures ramp started off so promising.
Most people that discuss the "economic collapse" focus on what is coming in the future. And without a doubt, we are on the verge of some incredibly hard times. But what often gets neglected is the immense permanent damage that has been done to the U.S. economy by the long-term economic collapse that we are already experiencing. But because unprecedented levels of government debt and reckless money printing by the Federal Reserve have bought us a very short window of relative stability, most Americans don't seem too concerned about our long-term problems. They seem to have faith that our "leaders" will be able to find a way to muddle through whatever challenges are ahead. Hopefully the following 12 charts will be a wake up call.
For the 3rd month in a row, S&P Case-Shiller home prices fell MoM with July's 0.5% drop the biggest since November 2011. This dragged the YoY growth to 6.75% (missing expectations of 7.4%) and its slowest rate of increase since November 2012. Non-seasonally-adjusted the drop is even larger (-0.6% MoM). Perhaps most notably San Francisco was the biggest drag on the index.
Following last week's explosion higher in new home sales (despite surging record high prices), it is somewhat intriguing that pending home sales would tumble over 4.1% YoY, and drop 1.0% MoM (missing expectations of a 0.5% drop) and the 2nd biggest drop in 2014. The 'stunning' rationale for this miss, provided by NAR's chief economist, is... "fewer bargain-priced homes' (which is odd given record prices and record surge in new home sales), and a "rising rate environment" (except rates are collapsing)...
Everyone's a genius in a Fed-induced rally. But what next...
It has been a relatively subdued session, with not much action in either stocks or bonds - European stocks rise for the second day on US market momentum from yesterday; Asian stocks are mixed advance while metals decline with Brent, WTI crude, U.S. equity index futures. The biggest highlight in overnight action, however, was once again the Dollar whick climbed to a fresh 4-year high, on pace to strengthen for 2 straight months for first time since March. The reason: ongoing sentiment that there will be a major dispersion between central banks, with the USD tightening just as other central banks join the liquidity fray. To wit, ECB data showed that lending decline in Europe slowed to -1.5% y/y in Aug. vs -1.6% in July and the latest statement from Draghi who said in Lithuania that economic reform possible without devaluing currency.
New Home Sales rose a magnificent (seasonally-adjusted annualized rate) 18% in August - the biggest monthly rise since January 1992 albeit with a 16.3 90% confidence interval, meaning the final number may well be +1.7%. At 504k, new home sales are back at May 2008 levels (though obviously massively below the 1.4 million homes sold at the peak in 2005). As a reminder, May's 504K new home sales print was later revieed later to 458K. But even more stunning, new home sales in The West rose a mind-numbing 50% in August (and up 84.4% YoY - nearly double). And just to confuse matters, the average new home sale price rose to a new record high of $347,900. So as existing home sales are sliding (and prices dropping), new home sales are surging (to new record highs) - makes perfect sense. We await the extrapolations for how great this move is. (or the realization that it is entirely seasonal-adjustment-biased and unsustainable given the realities of mortgage applications).
- A Month of Bombs Dropped in One Night of Strikes on Syria (BBG)
- Air strikes in Syria hit Islamic State-held areas near Turkey (Reuters)
- Pimco ETF Draws Probe by SEC (WSJ)
- Shadowy al Qaeda cell, hit by U.S. in Syria, seen as 'imminent' threat (Reuters)
- Yellen Warns on Market Calm Before ‘Considerable Time’ Up (BBG)
- Dudley Says Fed Needs U.S. Economy to Run ‘A Little Hot' (BBG)
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- Just a joke now: Barclays Fined Twice in One Day for Compliance Failures (BBG)
- Fired UPS worker kills two supervisors, self, in Alabama shooting (Reuters)
If yesterday the bombardment, no pun intended, of bad news from around the globe was too much even for Mahwah's vacuum tubes to spin as bullish - for stocks - news, then tonight's macro economic updates have so far been hardly as bombastic, with the only real news of the day has Germany's IFO Business Climate reading, which dropped from 106.3 to 105.8, declining for the 5th month in a row, missing expectations, and printing at the lowest level of since April 2013! (More from Goldman below) Net result: Bunds yields were once again pushed in the sub-1% category, even if stocks today are higher because the European data is "so bad it means the ECB has no choice but to do (public instead of just private) QE" blah blah blah.
With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.
While some were wondering if last night's sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round "tractor beam" number would provide a floor under the market .Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
It is unclear exactly why stock futures, bonds - with European peripheral yields hitting new record lows for the second day in a row - gold, oil and pretty much everything else is up this morning but it is safe to say the central banks are behind it, as is the "de-escalation" algo as a meeting between Russia and Ukraine begins today in Belarus' capital Minsk. Belarusian and Kazakhstani leaders will also be at the summit. Hopes of a significant progress on the peace talks were dampened following Merkel’s visit to Kiev over the weekend. The German Chancellor said that a big breakthrough is unlikely at today’s meeting. Russian FM Lavrov said that the discussion will focus on economic ties, the humanitarian crisis and prospects for a political resolution. On that note Lavrov also told reporters yesterday that Russia hopes to send a second humanitarian aid convoy to Ukraine this week. What he didn't say is that he would also send a cohort of Russian troops which supposedly were captured by overnight by the Ukraine army (more shortly).
Following last week's housing starts data, everyone was expecting a new home sales number that was even better than the consensus 430K. Instead, the July print of 412K was not only the 5th miss in the last 6 prints, but also the lowest number since March's 403K. The biggest drop took place in the Northeast where the sequential plunge was some 31% to just 18K new houses, and a whopping 44% from a year ago. There were declines in the Midwest which dropped 8.8% and in the West, which dropped 15.2%, while the only increase was recorded in the South which rose 8.1%. In fact, of all regions, only the South posted an increase from July 2013, surging by 33%, with new home sales in all other regions dropping.
Key highlights in the coming week: US Durable Goods, Michigan Conf., Services PMI, PCE, and CPI in Euro area and Japan. Broken down by day: Monday - US Services PMI, New Home Sales (Consensus 4.7%); Singapore CPI; Tuesday - US Durable Goods (consensus 7.5%) and Consumer Confidence; Wednesday - Germany GfK Consumer Confidence; Thursday - US GDP 2Q (2nd est., expect 3.70%, below consensus) and Personal Consumption; Euro area Confidence; CPI in Germany and Spain; Friday - US Michigan Conf. (consensus 80.1), PCE (consensus 0.10%), Chicago PMI; Core CPI in Euro area and Japan (consensus 2.30%). Additionally, with a long weekend in the US coming up, expect volumes into the close of the week to slump below even recent near-record lows observed recently as the CYNKing of the S&P 500 goes into overdrive.
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- Missouri Governor Defends Ferguson Prosecutor (BBG)
- Kuroda Douses Japan Stimulus Expectations (WSJ)
- London Jihadi Call Vies With Banks in Canary Wharf Shadow (BBG)
- Netanyahu Signals Expansion of Air Attacks in Gaza (WSJ)
- Libya's Islamist Militias Claim Control of Tripoli (WSJ)