Key News
*Home Prices in 20 U.S. Cities Declined by 18.6% in February (Bloomberg)
* New Zealand May Cut Interest Rate to Record-Low 2.5% (Bloomberg)
*Citigroup, Bank of America Decline on Capital Report (Bloomberg)
*Oil, Metals, Grains Drop on Outlook for Demand After Swine Flu (Bloomberg)
The Event Agenda
The Morning Run-Down
Though markets this morning are giving back some of the moves made overnight, the general theme is more risk aversion following yesterday’s sell off in stocks, commodities and carry trades… and surge in treasuries and the dollar. Global stocks are down across the board going into the NY session.
USD/JPY is being dragged lower, not by the risk aversion appeal of the yen, but as a product of carry trade selling driven by sentiment of elevated risk. Meanwhile, gold has diverged from the risk aversion instruments the past two trading sessions, declining yesterday…and more so this morning. And the plausible explanations for this divergence are few. Technically, however, gold traded into significant trendline resistance (from the Feb highs) yesterday and has traded 34 bucks lower since.
Tomorrow we get US GDP for the first quarter, core PCE and we hear from the FOMC– Plenty of fuel for volatility.
Charts and Data of Interest
The Case-Shiller index was released today reporting housing prices measured from the month of February. Prices dropped another 2.2% from the prior month and down 18% from the same period a year ago. With the general view that consumers and the economy cannot find the ground floor until housing stabilizes, just where might the bottom be?
Take a look at major asset classes and the magnitude of moves that have taken place over the past two years… all relative to where the reported housing market is positioned.
Asset Class Benchmarks
Commodities (CRB Index) fully retraced July 2002 levels
Stocks (S&P 500 Index) fully retraced October 2002 lows.
Fixed Income (10-years) surpassed 1998 levels.
Currencies (Carry Trades) have fully retraced 2000-2001 levels.
Real Estate (Case-Shiller) has retraced only July 2003 levels.
If housing follows suit, a retracement to 2002 levels would represent a nearly 40% peak to trough decline, another 7% or so to go on the downside. This would take housing prices back to pre-boom levels, equivalent to the value destruction that has taken place in other asset classes.
Related posts:
- Friday Recap … October 30, 2009 Key News * U.S. Economy: Consumer Spending, Confidence Fall...
- Morning Run … August 31, 2009 Key News * India’s Growth Accelerates for First Time...
- Friday Recap … September 25, 2009 Key News * Pound Declines as G-20 Agrees on...
{ 0 comments… add one now }