U.S. Existing Home Sales Fell in April
Existing-home sales fell 2.5% in April from the prior month to a seasonally adjusted annual rate of 5.46 million, the National Association of Realtors said Thursday. Compared with a year earlier, sales in April were down 1.4%—the second consecutive month sales declined on an annual basis. (…)
The median sale price for an existing home in April was $257,900, up 5.3% from one year ago. (…)
The latest sales numbers reflect purchases that were closed in April, based on contracts signed in February and March. Rate increases were still modest when the contracts were signed and economists said the impact of higher rates will be felt more strongly in the coming months. (…)
Sales dropped compared to a month earlier in Northeast, as well as the South and West—which had been regions of strength for the housing market. (…)
YoY, sales are down across the U.S. except in the South (+2.2%).
Wow!
Source: National Association of Realtors
Oil prices slide as OPEC, Russia mull output increase
(…) The losses came after media reports hit saying the Organization of the Petroleum Exporting Countries and Russia are discussing plans to lift their production for the first time sine 2016. Bloomberg said the major producers are considering pumping between 300,000 and 800,000 more barrels of oil a day, while Reuters said the number could be as high as 1 million barrels. (…)
The plans to now lift production again come amid worries that Iran’s exports will decline after the U.S.’s decision to pull out of the nuclear deal with Tehran and as output has collapsed in Venezuela. (…)
OPEC may decide to lift its output target at its June 22-23 meeting in Vienna, according to Reuters.
Mexico’s Pena Nieto ‘optimistic’ on NAFTA as country makes new offer Mexican President Enrique Pena Nieto on Thursday expressed optimism about NAFTA talks that have been thrown into disarray by a U.S. probe exploring auto tariffs, while a source said Mexico had made a new offer to seek a deal.
It’s Too Early to Give Up on Emerging Markets
However, the experience of recent years in emerging markets has led to efforts to reduce vulnerabilities. Current-account deficits have narrowed. It seems policy makers remain aware of the risks posed by the global economy, even though emerging-market inflation has been mostly well-behaved. (…)
The presence of a central-bank anchor is one element helping to produce very different outcomes in these markets. Over the past month, the Argentine peso and Turkish lira have both fallen more than 10% against the dollar. However, the Brazilian real and Mexican peso have fallen only by about as much as the euro, signaling this is more about a rising dollar than emerging markets; the Russian ruble is actually up 1%. Bond markets are proving discriminating too, although higher Treasury yields are a headwind everywhere.
None of this rules out a central-bank misstep in the future or a crisis from another source, such as a political blowup. But it does suggest that investors rattled by Argentina and Turkey should look more closely before writing off.
Richard Barley is looking in the rear view mirror and misses the differences this time around as explained in EMERGING SUBMERGING:
In previous EM crisis, developed world banks were the lenders to EM countries. This time around, the lenders are mainly bond investors and the borrowers a mix of EM corporates, small to very large, and, to a lesser extent, sovereigns.
In previous crisis, the epicenter was relatively limited to one or a few countries like Mexico in 1982, Thailand and Malaysia in 1997. Redirected capital flows made the crisis global but the economic damages were limited in time and scope. This time around, the visible problems are in Turkey, Argentina and Venezuela but heavily dollar-indebted corporations, spread across the world, are silently suffering the pain of being slowly strangled by rising rates and the strong USD. Eventually, the strangled groundhogs will suddenly emerge from their increasingly uncomfortable undergrounds in need of financial air or simply declare bankruptcy.
In previous crisis, the risk-off trades were in equities and the debt instruments of specific countries and banks. This time around, the risk-off trades will combine both equities and EM bond funds, creating a lot more additional pressures on the weak currencies and further boosting the USD, amplifying the problem in the process. ETF investors will want to rush to the exits, only to find very narrow exit doors with few buyers on the other side? This time around, the next EM crisis will also be a liquidity crisis that will likely impact all asset classes in both emerging and developed markets.
China Inc tightens reins on debt, raises specter of slowdown
Goldman Says Riskiest Junk Bonds Are Most ‘Mispriced’ Since 2007
(…) That outperformance has helped push spreads on the Bank of America Merrill Lynch gauge of CCC rated debt to below 700 basis points earlier this week — the smallest premium since July 2014.
Meanwhile, Goldman’s preferred valuation measure of corporate credit, which subtracts their projected expected-loss rates from current spreads, shows U.S. high-yield obligations are now mispriced for even the most benign scenarios. (…)
FYI: BlackRock Emerging Markets Marker Compare emerging markets across key metrics
Congressional Budget Office’s Long-Term Deficit Forecast Dwarfs White House Estimate The CBO estimates President Donald Trump’s 2019 budget proposal will result in deficits in 2027 and 2028 that are more than twice the White House’s forecasts.
(…) Deficits would total $9.5 trillion over the coming decade, or $2.3 trillion more than the White House estimates, CBO said Thursday in an analysis of the President’s Budget. (…)
According to the CBO’s estimate of the President’s Budget, the federal deficit would narrow from 3.9% of gross domestic product in the 2018 fiscal year to 3.6% of GDP in 2028. That would take the debt held by the public from 78% of GDP in the current fiscal year to 86% of GDP in 2028. (…)
INTERESTING CHART
Source: ANZ Research (via The Daily Shot)