NEW$ & VIEW$ (26 NOVEMBER 2014)

Americans Borrowing More Briskly for Cars, Homes

Household debt—including mortgages, credit cards, auto loans and student loans—rose $78 billion between July and September to $11.7 trillion. Debt levels had fallen the previous quarter and remain $1 trillion below their peak in 2008. (…)

New mortgage loans, including refinanced mortgages, edged up to $337 billion after four straight quarters of declines, the Fed’s figures showed. Total mortgage balances—the biggest part of Americans’ debt—climbed $35 billion to $8.1 trillion.

While historically low, the uptick in new mortgages is a welcome sign for the nation’s housing market, which has struggled even as the economy comes off its best six-month stretch of growth since 2003.

In addition, auto lenders made $105 billion in new loans, the highest level in nearly a decade. Outstanding student loans rose $8 billion to $1.1 trillion.

Credit-card balances, which have generally been slow to rise, are now slightly above year-ago levels.

The share of mortgage debt seriously overdue dropped to 3.2% last quarter, from 3.4% in the second quarter. The share of seriously delinquent auto-loan debt also dropped, to 3.1%, from 3.3%—despite growing concerns about lax auto lending. Serious credit-card delinquencies eased, too.

New Mortgage Lending Drops to 13-Year Low New figures released by the Federal Reserve Bank of New York on Tuesday show that mortgage lending is running at its lowest level in 13 years, with 2014 on pace to be the weakest for new loans since 2000.

U.S. Home Prices Decelerated in September The yearly growth in home prices across the U.S. decelerated further in September, according to a home price report released Tuesday.

The home price index covering the entire nation increased 4.8% in the 12 months ended in September, said the S&P/Case-Shiller Home Price Index report. That is down from 5.1% in August.

On an unadjusted basis, the 10-city and 20-city gauges were unchanged in September from August, while the national index slipped 0.1%. S&P said that was the first national decline since November 2013.

German exports to RussiaGerman industry suffers sanctions fallout Germany’s exports to Russia are expected to fall 20% this year

German exports to Russia fell 16.6 per cent to €20.3bn in the first eight months of the year. (…)

Germany’s machinery sector has been particularly hard hit. Russia is the fourth most important export market for German machinery and plant technology. Sales were worth some €7.8bn last year but are drying up. (…)

Although Russia accounts for less than 3 per cent of Germany’s total exports, some 6,200 German companies do business in Russia and the uncertainty threatens jobs, says Ulf Schneider, managing partner at Russia Consulting in Moscow. (…)

Around 300,000 German jobs depend on trade with Russia.


Draghi stands ready…
ECB May Consider Sovereign QE Next Quarter, Constancio Says The European Central Bank will next quarter consider buying sovereign debt in relation to the size of each euro member’s economy if current stimulus proves insufficient, Vice President Vitor Constancio said.
OIL
Saudis signal no push for oil cut as market to ‘stabilize itself’

OPEC leader Saudi Arabia signaled on Wednesday it was unlikely to push for a major change in oil output at the producer group’s meeting this week, a day after Russia refused to cooperate in any production cut. Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilize itself eventually” but did not comment on talks with Russia held on Tuesday, which produced no firm pledge from Moscow to help support flagging oil prices.

Russia’s most influential oil official, state firm Rosneft’s (ROSN.MM) head Igor Sechin, emerged with a surprise message – Russia will not reduce output even if oil falls to $60 per barrel.

Sechin added that he expected low oil prices to do more damage to producing nations with higher costs, in a clear reference to the shale boom in the United States.

Many at OPEC were taken by surprise by Sechin’s suggestion that Russia – in desperate need of oil prices above $100 per barrel to balance its budget – was ready for a price war.

Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were gearing up for a battle over market share and insisted that non-OPEC producers needed to participate in any OPEC-led output cut.

OPEC Members Near Compromise on Cuts OPEC members are inching toward a compromise that could lead them to cut oil supplies by adhering more strictly to agreed production ceilings.

(…) Support for such a move, which would be based on tighter compliance with OPEC’s existing output limit as opposed to an outright cut to its production target, was coalescing last week at a meeting of OPEC advisers, according to several of those present. With oil prices having recently stabilized at around $80 a barrel following a 30% slide since the summer, some within OPEC have seen less urgent need for the group to take stronger action. (…)

“Saudi Arabia will likely go for a rollover” of the current ceiling, the Gulf official said on Tuesday. A call for strict compliance would be “an option they would go for.” (…)

Closer compliance would imply a supply cut of around 300,000 barrels of oil a day compared with October levels, according to OPEC technocrats who met last week. (…)

But a supply cut of around 300,000 barrels a day is unlikely to satisfy some OPEC members, such as Venezuela and Iran, who need oil prices well above $100 a barrel to balance their government budgets.

(…)  An OPEC production cut of around 1.5 million barrels would be needed to tighten global oil markets next year, according to oil analysts at Barclays . (…)

U.S. shale oil producers need oil prices in the range of $53 to $78 a barrel to break even, meaning most are profitable even with prices at their current level, according to estimates presented at an OPEC technical meeting last week. (…)

NEW$ & VIEW$ (25 NOVEMBER 2014)

Today: Biz execs less optimistic in U.S. and China. Draghi and friends. Another game changer.
Growth outlook weakens, according to U.S. private sector firms

The Markit Business Outlook Survey, which looks at expectations for the year ahead across 650 US private sector companies, indicated that corporate sentiment eased to a post-crisis low in the latest outlook period.

At +31.2 percent, the net balance of firms expecting a rise in activity over the coming 12 months was down from +51.4 percent in the previous survey conducted in the summer. Moreover, the latest reading is the lowest seen since the survey began five years ago.

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Nonetheless, U.S. firms indicated that the degree of positive sentiment towards future growth remained stronger than the global benchmark (+27.8 percent). The Republic of Ireland (+67.1 percent) and the UK (+55.0 percent) were the most optimistic nations, while the lowest confidence was recorded in Russia (+9.8 percent) and France (+12.6 percent).

Within the U.S. economy, manufacturers are much more upbeat about future output levels (+42.5 percent), than service providers (+28.9 percent).

Pointing up In line with softer growth expectations, the latest outlook survey indicated that the net balance of U.S. firms anticipating a rise in profits (+27.2 percent) was down from that seen during the summer (+33.0 percent) and the lowest since the series began in October 2009.

According to survey respondents, factors likely to weigh on future business conditions included fragile global economic growth, heightened geopolitical risk, ‘Obamacare’, domestic policy uncertainty, and strong competition for new work.

Meanwhile, capex intentions also eased slightly since the summer. At +4.1 per cent, the latest reading hit a post-crisis low and remained slightly above the global benchmark (+7.6 percent).

U.S. private sector companies expect to add to their payroll numbers over the next 12 months, with the net balance at +15.2 percent. However, the latest reading was was down from +17.4 percent during the summer and only slightly above the global benchmark (+14.0 percent). By sector, manufacturers are more positive about their job hiring plans for the forthcoming 12 months (+20.9 percent) than companies operating in the service economy (+14.1 percent).

Business sentiment strengthens slightly in China

The Markit Business Outlook Survey, which looks at expectations for the year ahead, signals further optimism at Chinese companies in October. A net balance of +26 percent of firms forecast a rise in activity over the coming year, up from +24 percent in June. Despite improving from the previous outlook survey, the net balance remains below the series long-run trend, and is slightly lower than both global and BRIC averages (+28 percent and +27 percent respectively).

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The improvement in overall sentiment was largely driven by service providers, where the net balance of companies expecting growth of activity increased from +20 percent in June to +27 percent in October. Furthermore, this is the highest net balance recorded for the sector in over a year-and-a-half. Panellists suggest that supportive state policies and expectations of stronger client demand are key factors that will boost activity over the next 12 months.

Meanwhile, the net balance of companies anticipating activity growth in the manufacturing sector dipped to a one-year low in October (+25 percent), with a number of respondents citing an uncertain global economic outlook.

German Business Mood Improves German business sentiment unexpectedly increased in November, a closely watched survey showed, suggesting Europe’s largest economy is slowly finding its footing again.

The Ifo Institute said Monday that its monthly business confidence survey rose to 104.7 from 103.2 in October, breaking a string of six straight monthly declines.

Not including a chart, the WSJ article gives a better impression. Here’s the reality (Haver Analytics):

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Speaking of German mood:

ECB’s Weidmann: Monetary Policy Alone Can’t Create Growth

Germany’s central bank president, Jens Weidmann, Monday expressed doubt that a potential government bond-buying program would increase growth in eurozone countries.

Speaking in Madrid, Mr. Weidmann—who is a member of the European Central Bank’s 24-strong governing council—said that monetary policy alone can’t create growth, and must be based on higher productivity and policy reforms.

“Central banks are not able to deliver growth,” Mr. Weidmann said. “Whenever we meet, this is always the first question, there is the conception that there is this silver bullet and this is distracting our attention from the main problem.” (…)

In recent months, Mr. Weidmann has often spoken out against the purchase of government bonds by the ECB. Other members of the governing council have expressed a similar stance.

OECD Warns on Eurozone Economy The eurozone needs monetary stimulus and a softening of fiscal discipline to ward off the threat of persistent economic stagnation, the Organization for Economic Cooperation and Development said.

In its economic outlook, the Paris-based organization singled out the eurozone as the black spot in an already gloomy picture of the global economy. Global growth will remain modest and unemployment above precrisis levels, with risks that financial volatility and weak confidence will make things even worse, the OECD said. (…)

It expects eurozone economic growth to edge up only slightly to 1.1% in 2015 from 0.8% this year. By contrast, the U.S. economy will grow 2.2% this year and 3.1% next year, the OECD said.

Inflation will also continue to be very weak in the eurozone at 0.6% next year compared with 1.2% in the U.S., and the currency bloc could even fall into a trap of declining prices, the OECD said. (…)

The OECD also highlighted Japan’s weakness and cut its growth forecasts for the country to 0.4% this year and 0.8% next year from 0.9% and 1.1% previously. But the OECD said recent steps to expand monetary easing and postpone consumption tax increases will “hopefully keep the economy on track.”

ECB’s Coeure Says Officials Won’t Rush as They Debate All Assets

The European Central Bank won’t make a hasty decision to add more stimulus and will hinge any measures on incoming economic data, Executive Board member Benoit Coeure said.

“We’ll have to understand how what we’ve already decided works — we’re not going to rush to a new decision without knowing,” Coeure said yesterday in an interview with Bloomberg Television’s Francine Lacqua. “We have to look at the data around us, and we have to discuss thoroughly all possible options in particular when it comes to buying new assets. There’s unanimous agreement in the Governing Council that there might be situations where we’d have to do more.” (…)

“We’re not committing to any particular time line,” said Coeure, who is the official responsible for market operations at the ECB. “We’ll have a discussion in December, we’ll look at the numbers, we’ll look at how the economy is doing, and what we’ve been able to achieve on the ABS market, which has just started a couple of days ago, and on the covered bond markets. We’ll have that discussion, and if it’s not in December it will be later.”

But Draghi stands ready to act…

SENTIMENT WATCH
Markets: American bulls in charge

(…) The strength of the consensus worries even self-confessed dollar bulls, like Marc Chandler of Brown Brothers Harriman.

He says: “I’m just finishing up a huge business trip that took me through the US and Europe and Asia, and I’ve not met a single money manager who’s not bullish on the dollar, not bullish on US stocks or not bullish on the divergence story. What could go wrong is not that something goes wrong in Europe or Japan, but that the shine goes off the US side of the story.”

ANOTHER GAME CHANGER
Tiny satellites show us the Earth as it changes in near-real-time

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