Tuesday, August 18, 2015

Markets fluctuate amid US and Chinese housing data

Dow inched up 3, decliners over advancers better than 3-2 & NAZ fell 13.  The MLP index was off fractionally in the 366s & the REIT index slid a fraction to the 324s.  Junk bond funds drifted lower & Treasuries were sold.  Oil was flattish in the 42s (more than 6 year lows) & gold pulled back.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYMCrude Oil Oct 1542.53 Up 0.12 (0.3%)

GCQ15.CMXGold Aug 151,110.00 Down 8.60 (0.8%)

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New-home construction in the US climbed in Jul to the highest level in almost 8 years, indicating the industry will pick up in H2.  Residential starts rose 0.2% to a 1.21M annualized rate, the most since Oct 2007, from a 1.2M pace in the prior month (higher than previously estimated), according to the Commerce Dept.  The forecast was 1.18M.  A drop in permits, a proxy for future construction, signals additional gains will take time to develop.  Rising employment & low mortgage rates are enticing buyers, while increasing prices induced by a lack of homes on the market is an incentive to start new developments.  Data showing builder sentiment at a decade high in Aug underscores the view that the housing rebound will stay on track even as the Federal Reserve is poised to boost borrowing costs.  Permits decreased to a 1.12M annualized rate.  The 16.3% drop was the biggest since Jul 2008.  They were projected to decrease to a 1.23M rate after 1.34M the prior month.  Authorizations have been see-sawing because of changes in legislation in the Northeast, where permits plunged by 60% last month.  Still all 4 regions of the country saw declines in Jul.  The increase in starts last month was led by a 12.8% gain in construction of single-family houses, taking them to a 782K rate, the most since Dec 2007.  Work on multifamily homes fell 17% to an annual rate of 424K.  Data on these projects, which have led housing starts in recent years, can be volatile.  2 of 4 regions showed increases in starts last month, led by a 20% gain in the Midwest.  Homebuilder confidence climbed in Aug to the highest level since 2005, figures showed yesterday.  Prospective buyers continue to face relatively low borrowing costs.  The average 30-year, fixed-rate mortgage was 3.94%, below last year’s high of 4.53% reached in early Jan 2014.

U.S. Housing Starts Reach Almost Eight-Year High

Chinese cities where home prices rose exceeded those where they declined for the first time in 16 months in Jul, as authorities removed some property curbs & interest rates fell.  New-home prices rose in 31 cities of the 70 the gov monitors, from 27 the previous month, according to data released by the National Bureau of Statistics.  They dropped in 29 & were unchanged in 10.  Prices, led by some of the biggest Chinese cities, extended gains from Q2, spurred by the easing of mortgage policies at the end of Mar & 4 reductions in borrowing costs since Nov.  The trend will continue this year as liquidity remains ample & expectations of rising prices further prompt more people to buy.  The average price of the 70 cities rose 0.17% from Jun, gaining for a 3rd consecutive month.  Loosened policy restrictions will have an “increasingly positive impact” on property sales in H2, Standard & Poor’s said in an Aug 14 report, raising its forecast for full-year sales to a gain of as much as 10% from a decline.  The average selling price may rise 5%, S&P said, compared to its previous projection of declines of as much as 5%.  Average new-home prices in 100 cities rose 0.54% in Jul from Jun.

China Home Prices Rise in More Cities

Greece’s parliamentary vote on a 3rd bailout last week underlined the split within Prime Minister Tsipras’s governing Syriza party, opening the door to new elections as early as next month.  Tsipras needed to rely on opposition party votes to pass the legislation after securing the backing of just 118 lawmakers from his governing coalition in the 300-seat chamber.  After the ballot, a Greek gov official indicated Tsipras could hold a vote of confidence in his administration as soon as the bailout is signed & the country has paid €3.2B due to the ECB on Thurs.  Defeat would trigger national elections as early as Sep.  While fresh elections may delay implementation of the bailout, they could also deliver Tsipras a strengthened mandate to enact a package that runs counter to the anti-austerity platform Syriza was elected on in Jan.  Tsipras’s priority remains to finalize the bailout, & only on Thurs will he consult with political allies over his next “political moves,” a gov official said.  In order to win the confidence vote, Tsipras needs the backing of at least 120 votes & a majority of lawmakers present.  The first of these conditions is likely, since some Syriza dissidents have indicated they could return to the fold.  The 2nd condition could be fulfilled if opposition parties, & opponents within the party, stay away from the vote.  The more important question could be whether Tsipras actually wants to win the vote, & remain stuck with a hobbled coalition.

What Next for Greece’s Tsipras as Syriza Rift Widens: Scenarios

This is another quiet day.  The 2nd half of Aug tends to be a slow time for the markets with many away on holiday.  Dow is stumbling around looking for direction.  One big cloud is the Greek debt mess which continues to bumble along, 2 steps forward & then 3 steps backward.  Dow is in the red for Aug & YTD.

Dow Jones Industrials

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